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DIFFERENCE PERFORMANCE PRESENCE - Desjardins Life Insurance

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DIFFERENCE PERFORMANCE PRESENCE - Desjardins Life Insurance Powered By Docstoc
					DIFFERENCE
PERFORMANCE
PRESENCE
2007 Financial RepoRt
DESjARDINS: ThE LARgEST
COOPERATIvE FINANCIAL
gROuP IN CANADA
Desjardins is much more than a bank. it is the largest integrated cooperative financial group in
Canada. Through the complementary operations of its network of caisses and more than twenty
subsidiaries, Desjardins Group offers a diversified range of competitively-priced financial services,
available worldwide and around the clock, tailored to the needs of its caisse member-owners
and clients.

its strength as a financial group, coupled with a highly disciplined approach to managing the
collective wealth of members and clients, allows Desjardins to record enviable results year after year.
With assets totalling some $150 billion, Desjardins has the distinction of being the number one
financial institution in Quebec, the 6th largest in Canada and among the top 100 in the world.

With its caisses, business centres, distribution networks and subsidiaries, as well as numerous virtual
access options, including the most popular financial Web site in Quebec, Desjardins is also the
most accessible financial institution in Quebec. As well, its numerous components have enabled the
Group to increase its presence – to growing acclaim – elsewhere in Canada, particularly in ontario,
as well as abroad, where it is recognized as a leader and serves as a model in many areas including
international cooperation.

Desjardins has been able to remain true to its mission of putting money at the service of its members
and clients for 107 years thanks to its financial performance, cooperative difference, committed
elected officers and the engaged employees who work in the Group’s various components.



■   Assets of $144.1 billion.
■   Across Canada, over 6 million members, 5.8 million of whom are in Quebec and ontario,
    including nearly 400,000 businesses.
■   6,584 highly committed elected officers and over 42,000 dedicated employees nation wide.              2007 SOCIAL
■   1,427 service outlets in Quebec and ontario: 536 caisses/branches and 891 service centres.            RESPONSIBILITY REPORT
■   114 service outlets in Manitoba and new brunswick: 41 affiliated caisses and 73 service centres.      Always listening to our
                                                                                                          members, clients and partners…
■   49 business centres in Quebec and 3 in ontario.                                                       with competent employees…
                                                                                                          who are committed to making
■   28 Desjardins Credit union outlets in ontario.                                                        the world a better place.
■   Approximately 20 companies offering a wide range of financial services, with many of them             We are pleased to present the 2007
    active in several Canadian provinces.                                                                 edition of our Social responsibility
■   3 Desjardins bank branches in Florida and a branch of Caisse centrale Desjardins in                   report to you. This publication
    the united States.                                                                                    revolves around four main themes:
■   A state-of-the-art virtual network on automated teller machines and the internet.                     listening to our members and clients,
                                                                                                          the importance of our employees,
                                                                                                          social and community involvement,
                                                                                                          and environmental awareness and
                                                                                                          protection. Health and financial
                                                                                                          security, two topics of significant
                                                                                                          interest to us, are at the heart of
                                                                                                          each one of these main themes.

                                                                                                          To find out how much Desjardins
                                                                                                          Financial Security contributes to
                                                                                                          society, read our 2007 Social
                                                                                                          Responsibility Report.
                                                                                                          To obtain a copy of this report,
                                                                                                          contact Desjardins Financial Security
                                                                                                          (our contact information appears at
                                                                                                          the end of this document).
                                                                                                                                                                                                                               01



                                                                                                                                                 TABLE
                                                                                                                                                 of conTEnTs
                                                                                                                                                 Profile                                                          02

                                                                                                                                                 2007AtaGlance                                                 03

                                                                                                                                                 MessagefromManagement                                          04

                                                                                                                                                 Tributetooutgoingpresident                                   06
                                                                                                                                                 ofDesjardinsGroup

                                                                                                                                                 ManagementReport                                                07

                                                                                                                                                 R
                                                                                                                                                  esponsibilityforFinancial                                   29
                                                                                                                                                 Reporting

                                                                                                                                                 Auditors’ReportandAppointed                                 30
                                                                                                                                                 Actuary’sReport

                                                                                                                                                 ConsolidatedFinancialStatements                               31

                                                                                                                                                 Five-YearSummary                                                57

                                                                                                                                                 CorporateInformation                                            58




An InTEGRATED cooPERATIVE
fInAncIAL GRoUP

                                                 5,744,098 MEMBERS                                                                                                52,214 DCU MEMBERS                   239,116 MEMBERS
                                                                                                                                                                  and 13,408 CLIENTS                   in New Brunswick
                                                 in Québec and Ontario                                                                                            in Ontario                           and Manitoba



                                                 536 CAISSES POPULAIRES AND CAISSES D’ÉCONOMIE                                                                                                         40 CAISSES
                                                                                                                                                                           Desjardins                  in New Brunswick
                                                 in Québec and Ontario                                                                                                     Credit Union
                                                                                                                                                                                                       and Manitoba




       Desjardins                                                                                                                                                                                              New Brunswick
                                                                                                                                                  Ontario                                                      and Manitoba
       Financial Services                                                                                                                         Federation
       Firm                                                                                                                                                                                                    Federations



                                                                                                     FÉDÉRATION
       Desjardins
       Trust                                                                                         DES CAISSES
                                                                                                     DESJARDINS
                                                                                                     DU QUÉBEC
                                                        Caisse centrale                                                                      Développement                                        Société
       Fonds de sécurité                                Desjardins                                                                                                                 Fondation      historique
                                                                                                                                             international                         Desjardins     Alphonse-
       Desjardins
                                                                                                                                             Desjardins                                           Desjardins




                                                                                                                                                                                                                                    des ja r di ns fi na nc ial s ec ur it y
                                                        Caisse centrale
                                                        Desjardins
                                                        U.S. Branch
       Capital
       Desjardins
                                                              Desjardins
                                                              Bank




              Desjardins                                                                             Desjardins
              Securities                                Desjardins                                                                           Desjardins                                 Desjardins
                                                                                                     General Insurance
                                                        Venture Capital                                                                      Financial Security                         Asset Management
                                                                                                     Group
              Disnat



 Gestion          Valeurs                            LP and Desjardins Desjardins                                                         Desjardins
                                                     regional                             The Personal   Certas Direct,   Desjardins                                               Desjardins
 Valeurs          mobilières      Market                               Capital régional   Insurance      Insurance        General         Financial       Sigma Assistel           Global Asset
                                                     development                                                                          Security                                                Fiera Capital*
 mobilières       Desjardins      Perspectives                         et coopératif(1)   Company*       Company*         Insurance*                                               Management
 Desjardins       International                      funds                                                                                Investments

 Desjardins       Desjardins                                                              The Personal   Desjardins       Certas                                                   DGAM           Desjardins
 Securities       Securities /                                                            General        General          Home and Auto                                            Holding        Gestion
 Financial        Bodiam                                                                  Insurance*     Insurance        Insurance                                                Company        immobilière
 Services                                                                                                Services*        Company*




(1) Venture capital public funds managed by Desjardins Venture Capital Inc.                                                                                                               Ownership link
                                                                                                                                                                                          Auxiliary members
December 31, 2007
                                                                                                                                                                                    *     Shared ownership
Note: Chart does not reflect the legal ownership structure.
                                           02




                                           DEsjARDIns
                                           fInAncIAL sEcURITy


                                           Desjardins Financial Security Life Assurance Company (Desjardins             Desjardins Financial Security also serves its clients through financial
                                           Financial Security or the Company) offers a flexible array of life and       institutions, such as the Desjardins caisses, Desjardins Business Centres
                                           health insurance as well as savings and retirement products and services     and Desjardins Credit Union branches. It also has a network of
                                           designed to meet the changing financial security needs of individuals,       281 caisse-dedicated financial security advisors and maintains business
                                           groups and businesses. The Company delivers these products and               relationships with many group plan representatives, consulting actuaries,
                                           services with the help of dedicated employees and partners who               brokers and general managing agents (MGA) across Canada. Some of
                                           are committed to ensuring the satisfaction of caisse members and             its products can also be purchased directly, either on line or by phone.
                                           the Company’s clients.
                                                                                                                        Desjardins Financial Security has two main subsidiaries:
                                           Desjardins Financial Security is a subsidiary of Desjardins Group, the
                                           largest integrated cooperative financial group in Canada with over           Desjardins financial security Investments Inc. is a mutual fund
                                           $144.1 billion under management and more than 42,000 employees               investment and insurance brokerage firm. Through this firm, the
                                           at its service.                                                              affiliated representatives, caisse-dedicated financial security advisors,
                                                                                                                        and financial planners in our financial centres, and group savings plan
                                           Desjardins Financial Security helps more than five million Canadians         representatives, have access to the products of more than 15 Canadian
                                           prepare for life’s contingencies and plan a financially secure retirement    insurance manufacturers and over 60 manufacturers of mutual funds.
                                           by offering them tailor-made combinations of life and health insurance
                                           coverages to protect them against the financial repercussions of             sigma Assistel Inc., another subsidiary of Desjardins Financial Security,
                                           accidents, illness and death, as well as innovative savings solutions to     has been in business since the mid-1980s. A pioneer in Canadian
                                           provide them with the peace of mind they need today and the means            telephone assistance services, Sigma offers the most diversified range
P RofILE




                                           to achieve their retirement plans and dreams tomorrow.                       of services in this area of activity in Canada, including travel and
                                                                                                                        international assistance, roadside assistance, convalescence assistance,
                                           The result of mergers involving some twenty portfolios and companies,        legal and identity-theft assistance, and employee assistance programs
                                           including Desjardins-Laurentian Life Assurance and The Imperial Life         (EAP). Today, Sigma Assistel Inc. has an extensive portfolio of domestic
                                           Assurance Company of Canada, and boasting more than a century                and international clients, such as insurance companies, financial
                                           of experience, the Company, which pioneered the concept of                   institutions, credit-card issuers and associations. Over five million
                                           bankassurance in this country, is a major player in the life and health      Canadians have round-the-clock access to Sigma’s assistance services—
                                           insurance and financial services industry in Canada. Today, Desjardins       from anywhere in the world.
                                           Financial Security ranks fourth among life and health insurers in
                                                                                                                        1
                                           Canada and first in Quebec in terms of written premiums1.                        The market data used in this report is based on information in reports published recently
                                                                                                                            by the Office of the Superintendent of Financial Institutions and the Autorité des marchés
                                                                                                                            financiers. The majority of the information is presented as at December 31, 2006.
                                           In addition to its head office in Lévis, Desjardins Financial Security has
des ja r di ns fi na nc ial s ec ur it y




                                           branches in several cities across Canada, including Vancouver, Calgary,
                                           Winnipeg, Toronto, Ottawa, Montréal, Québec, Halifax and St. John’s.

                                           To accommodate the individual preferences of its various clienteles,
                                           the Company makes its products and services available to individuals
                                           and groups through its sales offices and a variety of other distribution
                                           channels, including the financial centres of SFL Partner of Desjardins
                                           Financial Security and SFL Investments, Financial Services Firm in Quebec
                                           and the financial centres of Desjardins Financial Security, Independent
                                           Network and Desjardins Financial Security Investments Inc. in the
                                           other Canadian provinces. These financial centres meet the needs
                                           of individuals and business owners alike.
                                                                                                                                                                                                  03




2007 AT A GLANCE
                                                                                                                                             KEy AchIEVEmEnTs
years ended december 31
(in millions of dollars, unless otherwise indicated)
                                                                                                                                             ■   Net income of $216.7 million,
                                                                                                                                                 up 43.2% over 2006.
                                                           2007              2006                          2005           Variation(%)      ■   Operating income of
                                                                                                                   2007/2006             $288.3 million, up 42.2%.
  net Premiums                                              2,575.3          2,438.4                      2,300.3                     5.6    ■   Return on shareholder’s equity of
                                                                                                                                                 27.5% – one of the best rates in
  Group Insurance Premiums                                  1,937.1          1,691.5                       1,542.9                 14.5          the financial services industry.
   Administered groups (ASO)*                                  68.0             53.8                          50.8                 26.4      ■   In-force insurance growth
                                                                                                                                                 of 13.1%.
  Individual Insurance Premiums                              392.6                374.2                     362.4                     4.9
                                                                                                                                             ■   Net premiums of $2.6 billion,
                                                                                                                                                 up 5.6%.
  savings
    Group products                                           218.5                290.6                     316.1                -24.8       ■   Very strong insurance sales growth
    Individual products                                      255.8                254.9                     236.6                  0.4           outside Quebec:
    Mutual funds                                             636.3                516.9                     461.7                 23.1           - 174% growth in group and
                                                                                                                                                   business insurance sales over
                                                                                                                                                   the past two years;
  net Investment Income                                      514.3                674.1                     672.0                -23.7
                                                                                                                                                 - 42.1% growth in individual life
                                                                                                                                                   insurance sales in 2007.
  net income                                                 216.7                151.3                     159.7                  43.2
                                                                                                                                             ■   Group insurance premiums
  Return on shareholder’s Equity                              27.5%                20.7%                      24.9%                   6.8%       up 14.9%.
                                                                                                                                             ■   Premiums from the sale of direct
  Balance sheet                                                                                                                                  distribution products up 9.7%.
   Assets under management                                                                                                                   ■   General fund assets up 11.9%
   - General fund                                          15,307.9         12,804.0                      11,921.3                 19.6          from January 1, 2007.
   - Segregated funds                                       2,246.9          2,112.1                       5,292.3                  6.4
                                                                                                                                             ■   Profitability in all business lines.
   Assets under administration




                                                                                                                                                                                                       2007 AT A GLA nc E
     (mutual funds)                                         5,021.4          5,028.4                       3,170.2                  -0.1     ■   In-force Vision’ contracts reached
   Total assets under management                                                                                                                 the 100,000 mark.
     and administration                                    22,576.2         19,944.5                      20,383.8                 13.2      ■   In individual retirement savings,
   Actuarial liabilities                                   10,207.8          8,635.4                       8,185.0                 18.2          launch of the Helios Contract, one
                                                                                                                                                 of the most innovative products
  human Resources                                                                                                                                on the market.
   Permanent employees                                       3,546                3,432                     3,313                   3.3      ■   Signing of several major group
   Temporary employees                                         347                  302                       346                  14.9          insurance contracts, particularly
   Representatives and brokers                               5,542                5,321                     5,873                   4.2          outside Quebec.
                                                                                                                                             ■   Signing of a direct insurance
* ASO: Administrative Services Only
                                                                                                                                                 product distribution agreement
                                                                                                                                                 with a major national endorser
                                                                                                                                                 in the retail industry.
                                                                                                                                             ■   Signing by Sigma Assistel of
                                                                                                                                                 several service agreements,
                                                                                                                                                 bringing the total number of
                                                                                                                                                 Canadians with access to its




                                                                                                                                                                                                       des ja r di ns fi na nc ial s ec ur it y
                 BuSIneSSInFoRCe*                                                           PReMIuMInCoMe
                                                                                                                                                 assistance services to 5 million.
      As at December 31 (in billions of dollars)                                  As at December 31 (in millions of dollars)
                                                                                                                                             ■   Acquisition of the complexe
                                                                                                                                                 Desjardins in Montréal and
                                                   171.0




                                                                                                                                 2,575.3




                                                                          3,000                                                                  the buildings occupied by the
                                        151.2




175
                                                                                                                       2,438.4




                                                                                                                                                 Fédération des caisses Desjardins
                                                                                                             2,300.3
                              137.1




                                                                                                                                                 du Québec and Desjardins
                   131.9
         126.4




150
                                                                                                2,090.2




                                                                          2,500                                                                  General Insurance Group on
                                                                                     2,013.1




                                                                                                                                                 the Lévis campus.
125
                                                                          2,000
100

 75                                                                       1,500

 50
                                                                          1,000
 25

  0                                                                        500                                                               1   The Vision environment includes a
                                                                                                                                                 comprehensive range of insurance coverages in
         2003


                    2004


                              2005


                                        2006


                                                   2007




                                                                                      2003


                                                                                                2004


                                                                                                             2005


                                                                                                                       2006


                                                                                                                                 2007




                                                                                                                                                 the event of death, disability, accident or health-
                                                                                                                                                 related problems.

      * Insurance in force
                                           04




                                                                                                 ALBAn D’AmoURs
                                                                                                 chief executive Officer
                                                                                                 of desjardins Group




                                                                                                              RIchARD foRTIER
                                                                                                              President and chief Operating
                                                                                                              Officer of desjardins financial
                                                                                                              security




                                           REAFFIRMING
                                           OUR SOLID GROWTH
mEss AGE f Rom mA nAGE mEn T




                                           Our results, as we undertake this final phase of Desjardins Financial Security’s 2006-2008 strategic plan,
                                           show that our choice of strategic priorities is sound and that the efforts we have invested in achieving
                                           our objectives have been successful. These results are a clear indication of the strength of our Company’s
                                           growth, especially outside Quebec where we continue to position ourselves more and more as an alternative
                                           of choice to the top life and health insurers.

                                           In terms of business development, insurance sales have improved substantially for the second year in a row
                                           with a premium increase of 12.8%. In group insurance, Desjardins Financial Security enjoyed another record
                                           year in terms of net business growth, especially in the group and business insurance market where we
                                           recorded significant growth of almost twice the industry average. With close to $240 million in sales, this is
                                           the first time in the Company’s history that sales in this activity sector have crossed the $200-million mark.

                                           The Company’s net income also reached record levels to stand at                 sUccEssIon PLAnnInG
                                           $216.7 million, for a substantial increase of $65.4 million over 2006.
                                           The share of net income attributable to the ultimate shareholders, the          The general aging of the workforce will increase the risk of labour
des jar d in s f i nan ci al s ec ur ity




                                           Desjardins caisses, totalled $211.1 million. We also posted an excellent        shortages over the coming years in all industries, including the
                                           return on shareholder’s equity of 27.5%, which is one of the best in            insurance industry. To deal with this risk, as part of an overall succession
                                           the industry. With results like these, Desjardins Financial Security makes      planning effort, we have been working with our managers on a
                                           an important contribution to the profitability of Desjardins Group and          variety of measures aimed mainly at accelerating the development of
                                           its expansion across Canada.                                                    managerial skills, especially those of our professionals and team leaders.
                                                                                                                           By identifying the key positions that are likely to become vacant in the
                                           Inspired by these results, which exceeded our expectations in some              next few years and taking preventive and proactive steps, we plan to
                                           areas, we plan to build on our success in order to strengthen our               deflect the impact such shortages could have on our ability to achieve
                                           position as the fourth largest life and health insurer in Canada and            the Company’s business plan. We are also working on a flexible work
                                           increase our leadership in Quebec. We will step up our efforts to grow          schedule project aimed at promoting a better work-life balance in order
                                           organically in all our activity sectors, while paying special attention         to attract and retain the human resources we need. All managers will
                                           to the development of our integrated service offer in the network of            be asked to do their part, subject to the needs of their business lines,
                                           Desjardins caisses.                                                             to ensure the success of this Company-wide project.
                                                                                                                                                   05


A DynAmIc BoARD                                                             Lastly, we would like to thank Mr. Denis Berthiaume and Ms. Constance
                                                                            Lemieux, who left us in 2007 after holding strategic positions within
Under the direction of Chair Sylvie St-Pierre Babin, the thirteen members   the Company for more than a decade. Ms. Lemieux remains within
of the Board and its various committees (Executive, Investment, Audit       Desjardins Group.
and Ethics) met 44 times in 2007.
                                                                            oUTLooK
Aside from ensuring compliance with the Company’s mission and
values, Board members closely monitored the execution of Desjardins         Proud of the results we will be presenting in the next few pages, we
Financial Security’s major strategic priorities. They reviewed and          remain confident, determined and committed to achieving our 2006-
approved budgets and financial statements, and examined a number            2008 strategic plan. We will be intensifying the pace of growth in all
of important issues, such as rules of governance, risk management,          our markets by capitalizing on our distinctive strengths as a Company,
the succession management plan for the Company’s managers, national         which include our affiliation with Desjardins Group and our committed
development, and workforce planning. The Board also worked on               employees for whom we want to be an employer of choice every day.
files related to synergy with Desjardins Group and its subsidiaries,
and adopted or revised several policies governing the activities of         Our performance in the coming year will pave the way for a new three-
the Company, its employees and compliance with sound and prudent            year plan with its own set of strategic priorities and objectives which
management practices.                                                       will be just as challenging. However, our main objective remains the
                                                                            same: to continue to assume our responsibilities towards the five million
For their own professional development, Board members also attended         Canadians who rely on us to ensure their financial security, and to offer
various training sessions on topics and issues related to the financial     our ultimate shareholders, the Desjardins caisses, returns that meet their
services industry. As a result, they are now better equipped to             expectations. We thank our shareholders for their confidence.
assume their responsibilities and contribute to the sound and prudent
management of the Company.




                                                                                                                                                         mEss AGE fRom mA nAGE mEnT
A coLLEcTIVE sUccEss sToRy
                                                                            Alban D’Amours                          Richard fortier
Our 9,435 employees, representatives and partners remain as committed       Chief Executive Officer                 President and
as ever to making their experience and expertise available to our clients                                           Chief Operating Officer
and helping our Company fulfil its mission. For that, we thank them
sincerely. To the members of our Senior Management Committee,
we would like to extend our special gratitude for securing their teams’
support for our mission, values and strategic priorities, and also for
contributing to the Company’s success.

We also thank the officers of Desjardins Group and the members of our
Board of Directors who gave us such excellent and invaluable support
throughout the year. To Ms. Ursula Menke, who left the Board during
the year, we extend our sincere thanks for her active contribution to
the Board. Incidentally, we would like to welcome Mr. Robert Guerriero,
who joined the Board during the year.




                                                                                                                                                         des jar d in s f i nan ci al s ec ur ity
                                                                  06




                                                                  WITH OUR HEARTFELT THANkS,
                                                                  MR. D’AMOURS
                                                                  Mr. Alban D’Amours, Chief Executive Officer of Desjardins
                                                                  Financial Security for the past four years, was also President
                                                                  and CEO of Desjardins Group for two consecutive mandates,
T RIBUTE T o oUTG oIn G PREs IDEn T of DEs jA R D In s G Ro U P




                                                                  from March 2000 to March 2008. During that time, he
                                                                  demonstrated an extraordinary ability to listen to people’s
                                                                  concerns and to encourage discussion and the exchange
                                                                  of ideas, while steadfastly supporting Desjardins Group’s
                                                                  mission and rigorously applying the means to accomplish it.

                                                                  Under the leadership of Mr. D’Amours, Desjardins has
                                                                  sought to combine financial performance with cooperative
                                                                  performance. This approach has enabled the organization
                                                                  to achieve excellent financial results while ensuring that
                                                                  it is always ready to meet the needs of its members and
                                                                  their communities.

                                                                  The Desjardins Group that Mr. D’Amours leaves us today
                                                                  is now strengthened by a cooperative governance and
                                                                  strategic management approach that direct the actions of all
                                                                  its components. It stands out for its high-quality, diversified
                                                                  range of financial services, its commercial and management
                                                                  practices imbued with cooperative values, a rich and active
                                                                  democracy, and business development focused on the
                                                                  whole of Canada. It draws its strength from employees who
                                                                  enjoy a working environment that offers them numerous
                                                                  opportunities for personal and professional development.
                                                                  All these aspects serve to inspire us with great confidence
                                                                  for the future.
                                                                                                                                    ALBAn D’AmoURs

                                                                  The members of the Board of Directors, the Senior
                                                                  Management Committee and the employees of Desjardins
                                                                  Financial Security would like to express their sincere
des ja r di ns fi na nc ial s ec ur it y




                                                                  gratitude to Mr. D’Amours for his achievements and for
                                                                  the very human qualities he displayed during his busy time
                                                                  in office. We all wish him every success and happiness as
                                                                  he embarks on this new stage in his life.
                                                                                                                                                                                                              07




mAnAGEmEnT
REPoRT


OUR VISION
cAPITALIzInG on ThE BEnEfITs of InTEGRATIon AnD PARTnERshIP wITh DEsjARDIns GRoUP,
oUR GoAL By ThE EnD of oUR 2006-2008 ThREE-yEAR PLAn Is To:
■   Be recognized as a major player in our industry across Canada. This means increasing our market shares to strengthen our position in the Quebec
    market and doubling our market shares in our chosen markets in the other provinces;
■   Be recognized as a manufacturer that offers distinctive advantages and an alternative of choice to the three top life and health insurers in Canada;
■   Proactively develop and offer our clients products and services that stand out in terms of price-quality ratio, simplicity, and ease of doing business;
■   Optimize our preferred relationship with the Desjardins caisse network and establish closer ties with our partners and clients;




                                                                                                                                                                                                                   mAn AGE mE n T REP oRT
■   Develop our two sectors of excellence: product development and management, and service to clients and distribution partners;
■   Focus on operational efficiency and build on the commitment of our employees;
■   Generate returns that meet our shareholder’s expectations.




                                                                                                                                                                                                                   des ja r di ns fi na nc ial s ec ur it y




    caution concerning forward-Looking statements

    Certain statements in this Management Report, in particular those relating to the Company’s strategies or future operating results, and those contingent upon future conditions or events, are forward-
    looking statements. They are usually characterized by the use of such words as “may”, “should”, “expect”, “estimate”, “plan”, “believe” or similar expressions, or by the use of the conditional.
    The purpose of these statements is not to provide information on past occurrences, but to present the Company’s expectations, estimates and forecasts with respect to future events.
    The forward-looking statements in this Management Report are not guarantees of future performance and involve risks and uncertainties of a scope that is difficult to predict. The Company’s future
    results may differ from those presented in the forward-looking statements in this report, in particular because of factors covered under “Risk Management.” Other factors, such as changes in
    legislation or regulations, changing economic conditions, technological advances, and the impact of fierce competition in a market extremely susceptible to the forces of globalization may also affect
    the accuracy of the forward-looking statements in this report. The Company does not undertake to update or amend such forward-looking statements whether as a result of new information, future
    events or otherwise, except as may be required by applicable law.
                                            08




                                            2006-2008
                                                                                                                 2006-2008 sTRATEGIc
                                            STRATEGIC PRIORITIES                                                 PRIoRITIEs
                                                                                                                 1. Develop caisse markets in an accelerated
                                                                                                                    and profitable manner by enhancing
                                            Our 2006-2008 strategic priorities, and our key achievements under      the caisse offer with the added
                                            these priorities in 2007, are presented in the table below.             value of life and health insurance in
                                                                                                                    partnership with Desjardins Group.




                                                                                                                 2. In non-caisse markets in Quebec,
                                                                                                                    become a leader in group insurance
                                                                                                                    and grow faster than the market in
                                                                                                                    group retirement savings, individual
                                                                                                                    insurance and direct insurance;
                                                                                                                    develop the individual savings market
                                                                                                                    by optimizing the potential of the
                                                                                                                    company’s chief distribution network
                                                                                                                    in Quebec: sfL Partner of Desjardins
                                                                                                                    financial security.
mAn AGE mE n T REP oRT




                                                                                                                 3. In select markets outside Quebec,
                                                                                                                    double our overall market share,
                                                                                                                    notably through acquisitions.




                                                                                                                 4. Improve operational efficiency
                                                                                                                    in all our sectors to create
                                                                                                                    competitive advantages.
de sja r di ns fi nan ci a l s ec ur i ty




                                                                                                                 5. Balance business development with
                                                                                                                    overall sustainable performance: satisfy
                                                                                                                    the needs of members and clients
                                                                                                                    with motivated employees while
                                                                                                                    meeting the profit expectations of
                                                                                                                    our shareholder.
                                                                                                                                                      09




KEy AchIEVEmEnTs In 2007

■   100,000 Vision contracts in force since the launch, in the year 2000, of our offer of life and health insurance to Desjardins members through
    caisse-dedicated financial security advisors.
■   Specialization of caisse-dedicated financial security advisors in order to develop specialized clienteles, and maintain and develop existing
    Desjardins caisse network clientele.
■   Offer of credit insurance on new financing products sold in the Desjardins caisses and Desjardins Business Centres (DBCs), including the Versatile
    Line of Credit for individuals and Revolving Credit for businesses.
■   Optimization of the sales process in the DBCs.
■   Implementation of new procedures to facilitate the offer of credit insurance by the DBCs.
■   Development of solutions to make it easier for individuals to enrol in Line of Credit Insurance.
■   Distribution of prizes totalling close to $750,000 to Desjardins members who enrolled or renewed their enrolment in Loan Insurance as part
    of the 6th annual “Make your bills…our bills! with Loan Insurance” Contest.
■   Continuation of work on the integration of the lifetime annuity into the Desjardins member service offer.


■   Strong group and business insurance premium growth (7.6% in 2007, compared to the market’s average growth of 4.2%).
■   Launch of the TRACE – Lifecycle Environment, an innovative solution aimed at group pension plan sponsors.
■   New offer of Credit Balance Insurance and Accirance accident insurance on activation of the Visa Desjardins card, including 3 days of
    complimentary Travel Insurance.
■   Advertising campaign to promote Travel Insurance and 50+ Life Insurance in Quebec and Ontario that included a direct response TV campaign.
■   Significant increase in sales following the enhancement of our offer of direct insurance products via Desjardins.com.
■   Direct insurance premium growth of 10.5%.




                                                                                                                                                           mAn AGE mEn T REPoRT
■   Strong sales and premium growth:
    - 41.7% growth in individual life insurance sales outside Quebec;
    - 16.3% growth in group insurance sales.
■   Signing of an initial agreement with a credit union in Ontario to offer credit insurance and direct insurance products to its members, thus
    opening opportunities to develop this market across Canada.
■   Signing of an agreement with a major national endorser in the retail industry to distribute direct insurance products.
■   Signing of an insurance partnership with the Ontario Hospital Association representing some 70,000 health network workers.
■   Signing of group insurance contracts with the 11,000 members of the Newfoundland and Labrador Teachers’ Association and 10,000 employees
    of Metro Inc. and its affiliates.
■   In individual insurance, the continued development of the Desjardins Financial Security, Independent Network distribution channel by opening
    four new financial centres in Nova Scotia, Ontario and British Colombia.
■   In individual retirement savings, the introduction of the Helios Contract that offers à-la-carte guarantees with a family of Guaranteed
    Investment Funds.


■   Premium growth outpaced administrative expense growth.
■   Insurance unit costs reduced by 1.0%.
■   In individual insurance, the consolidation of certain call centre activities to increase our flexibility and accommodate growth.
■   Harmonization of funds management business processes.




                                                                                                                                                           de sja r di ns fi nan ci a l s ec ur i ty
■   Establishment of customer service measurement indicators in order to quantify the gains generated by our operational efficiency efforts.
■   Continuation of Client Profile project in order to consolidate all the client’s information into a single and completely secure file. More than
    2.6 million clients are now housed in the system, which is used by over 500 employees. Some areas are already recording efficiency gains
    and improved service quality.
■   Installation of a new Web tool giving over 1,000 Customer Service employees quick access to their work procedures; this tool has generated
    productivity gains and improved service quality.
■   Continuation of work to improve the administrative systems.


■ The satisfaction surveys we conducted among clients, caisse members and partners revealed:
  - A very high and growing level of satisfaction among caisse members and DBCs, in particular regarding the added value of our credit
    insurance offer;
  - A very high level of satisfaction among new insureds with respect to all products offered by direct distribution (Travel Insurance, 50+ Life
    Insurance, Credit Balance Insurance and Accirance, accident insurance), in terms of the coverages offered, the enrolment procedure and
    customer service;
  - An excellent level of satisfaction among group plan administrators and sponsors in terms of the products offered, service quality and various
    contract acquisition, administration, delivery and renewal processes.
■ Return on shareholder equity of 27.5%, one of the best rates in the industry.
                                           10




                                                      PERfoRmAncE AnALysIs
                                                      AnD oUTLooK

                                           INDUSTRy AND MARkET TRENDS
                                           Among the demographic trends that will              defined contribution plans in place of defined     In the group retirement savings accumulation
                                           impact the offer and demand of financial            benefit plans. Workers will have to get more       market, the first generation of “lifecycle”
                                           products and services in the next two decades       involved in the planning and financing of their    funds, a group of funds based essentially
                                           are the aging of the population, immigration        employee benefits. In turn, insurers will have     on the participant’s investment time horizon,
mAn AGE mE n T REP oRT




                                           and new family structures. The Canadian             to make sure employers and employees have          is making way for a new generation of
                                           population is expected to grow by only 0.7%         the health and retirement communication,           funds, which also take the investor’s risk
                                           per year on average between 2006 and                information and education tools they need.         tolerance into account. In 2007, Desjardins
                                           2031, but the number of Canadians aged                                                                 Financial Security launched its own “lifecycle”
                                           “65 and over” will increase by 3.1%. This           In Quebec’s credit insurance market, 2007          environment, which maps out a series of
                                           situation will affect the accumulation, health      was a good year for mortgage loans. However,       retirement paths linked to predetermined asset
                                           and payout markets as the main cohorts of           the downturn expected in the residential           allocation portfolios that take the participant’s
                                           baby boomers begin to retire. Plus, Canada’s        market in 2008 will gradually weaken demand        age and risk tolerance into account.
                                           population is concentrated not only in certain      for individual loans. Demand for consumer
                                           provinces, but also in certain urban areas          credit, which dropped slightly this year despite   In the individual insurance market, despite
                                           characterized by economic growth and strong         retail sales growth, should also slow down.        favourable economic conditions, the low rate
                                           immigration. The Canadian family structure is       Elsewhere, we have observed an increasingly        of new representatives entering the sales force
                                           also continuing to evolve, with the proportion      larger portion of credit shift from financial      may make it difficult for the insurance industry
                                           of childless couples and single-parent families     institutions to points of sale, such as car        to protect its share of the market against
                                           on the rise. Our offer of financial products        dealerships and furniture stores. This situation   substitute products. Aging baby boomers are
                                           and services will have to take this new reality     represents a challenge in terms of adapting        becoming increasingly aware of the need for
                                           into account.                                       our credit insurance products to these new         financial security in the form of guaranteed
                                                                                               distribution channels.                             retirement income, quality of life in the
                                           Consumer expectations and behaviours are                                                               event of loss of independence, and estate
des ja r di ns fi na nc ial s ec ur it y




                                           also changing rapidly due to the Internet,          On the savings front, older baby boomers are       planning. The needs of young families must
                                           which facilitates access to information and         entering the “Retirement Risk Zone”, that is,      also be addressed more adequately. To correct
                                           the sharing of information at all levels.           in the next five to ten transition years they      this situation, the life and health insurance
                                           Consumers are now playing a more active             will be entering the payout phase of their         industry must develop different strategies to
                                           role in determining informational content           retirement savings. One of the challenges for      attract new generations of representatives and
                                           and sharing their opinions of the products          these preretirees and retirees will be to make     facilitate their integration into the profession.
                                           and services companies offer them. As both          sure they don’t outlive their savings. They
                                           consumers and clients, they are looking for         must find the right balance between ensuring
                                           user-friendliness and efficiency at all stages      that they have a predictable source of income
                                           of the buying cycle. This unprecedented             and that their return on investment continues
                                           change in the client relationship is forcing all    to grow. In response to this situation, the
                                           partners down the distribution and service line     financial services industry is adapting its
                                           to change the way they do business.                 service offer by providing baby boomers with
                                                                                               integrated retirement income management
                                           From the point of view of employee benefit          solutions, which in some cases will relieve
                                           plans, the current trend among employers is         them of the burden of actively managing their
                                           to limit their financial involvement. This can be   portfolio’s asset allocation, as well as a wide
                                           seen at many levels, for instance, in the offer     range of income and investment options.
                                           of health spending accounts and the offer of
                                                                                                                           11




           fInAncIAL sTATEmEnT AnALysIs


2007 HIGHLIGHTS
The year was marked by four events: two major ones in the area of
profitability and business growth, a third associated with a major real
estate synergy project within Desjardins Group and the fourth involves




                                                                                                                                 mAn AGE mE n T REP oRT
the subprime crisis worldwide.

■   On the profitability front, the Company’s      ■   The Company acquired the complexe
    net income reached record levels in 2007           Desjardins in Montréal and the buildings
    to stand at $216.7 million, which represents       occupied by the Fédération des caisses
    over 43.2% growth over 2006.                       Desjardins du Québec and Desjardins
■   In terms of business growth, we continued          General Insurance Group on the
    to make major inroads into the Canadian            Lévis campus.
    market by signing key group and business       ■   The liquidity crisis on the non-bank asset-
    insurance contracts.                               backed commercial paper (ABCP) market
                                                       had an adverse effect of $17.8 million on
                                                       the Company’s net results for the year.

                                                                                                               8.8%             68.5%

                                                                                                                       15.7%




                                                                                                                                 des ja r di ns fi na nc ial s ec ur it y
    GEoGRAPhIc DIsTRIBUTIon of AcTIVITIEs                                                                                                                                   0.

                                                                                                     Western Canada
                                                                                                     Ontario
                                                                                                     Quebec
                                                                                                     Atlantic Canada
                              8.8%                              68.5%                                Outside Canada

                                                                           6.6%
                                                   15.7%



                                                                         0.4%

                    Western Canada
                    Ontario
                    Quebec
                    Atlantic Canada
                    Outside Canada
                                           12




                                           CONSOLIDATED FINANCIAL                                                                                     non-bank-sponsored Canadian conduits, which
                                                                                                                                                      in turn caused a liquidity crisis on the ABCP
                                                                                                                                                      market. In this context, these conduits were

                                           POSITION                                                                                                   unable to issue additional ABCP securities or
                                                                                                                                                      draw on their outstanding liquidity facilities to
                                                                                                                                                      meet their obligations under maturing ABCPs,
                                           Desjardins Financial Security presents its             AssETs UnDER mAnAGEmEnT                             a situation that impacted many investors,
                                           operating results and comparative data on              AnD ADmInIsTRATIon                                  including Desjardins Financial Security.
                                           a consolidated basis. They include the results of
                                           its subsidiaries including Sigma Assistel Inc. and     At the end of fiscal 2007, the Company              To deal with the effects of this lack of liquidity
                                           Desjardins Financial Security Investments Inc.         had total assets under management and               on the non-bank-sponsored ABCP market and
                                                                                                  administration of $22.6 billion, up 8.5%            restore a climate of trust, last August several
                                           nET IncomE                                             from January 1, 2007. The introduction of new       investors and financial institutions, including
                                                                                                  accounting standards, the effects of which          Desjardins Group, entered into an agreement.
                                           Desjardins Financial Security’s profitability          are detailed in Note 3 of the annual report,        The purpose of the agreement was to promote
                                           continues to grow with net income crossing             required financial instruments to be measured       the establishment of normal activity on the
                                           the $200-million mark for the first time in the        at fair value, thus increasing total assets as at   Canadian non-bank-sponsored ABCP market.
                                           Company’s history. In 2007, net income stood           January 1, 2007 by $874.0 million.                  The agreement led to the creation of the Pan-
                                           at $216.7 million, which represents a 43.2%                                                                Canadian Investors Committee for Third Party
                                           increase over 2006. These vastly superior              sALEs AnD PREmIUm GRowTh                            Structured Asset-Backed Commercial Paper.
                                           results are due to several factors, including                                                              The committee was mandated to propose a
                                           group insurance sales growth, favourable claim         Insurance and annuity premium income rose           fair and equitable restructuring plan applicable
                                           experience, improved investment returns and            by 5.6% in 2007 to stand at $2,575.3 million        to all investors through which ABCP securities
                                           better unit costs.                                     compared to $2,438.4 million in 2006.               would be converted into long-term floating
                                                                                                                                                      rate notes, the value of the underlying assets
                                                                                                  Net insurance premiums grew by 12.8% over           would be preserved, and the transparency of
                                                        ChAnGeInneTInCoMe
                                                                                                  2006 to total $2,329.7 million. In Quebec,          such assets would be enhanced in order to
                                                             (in millions of dollars)
                                                                                                  overall premium growth for all business lines       promote liquidity and market confidence in
                                                                                          216.7
mAn AGE mE n T REP oRT




                                                                                                  was 6.8%. In the other Canadian provinces,          the new notes.
                                                                                                  the individual and group insurance lines
                                                                                                  posted significant premium growth of 29.5%.         On December 23, 2007, the committee
                                             200
                                                                                                  Insurance sales growth remained strong in
                                                                         159.7




                                                                                                                                                      announced that an agreement-in-principle had
                                                                                  151.3




                                                                                                  2007 to stand at $415.7 million compared to         been reached for the global restructuring of
                                                               130.2




                                             150                                                  $364.8 million in 2006, for a 14.0% increase.       ABCP and that, subject to a certain number
                                                     109.7




                                                                                                  This remarkable performance is due mainly           of conditions (including various consents and
                                                                                                  to group and business insurance sales. In           approvals) implementation of the agreement
                                             100                                                  individual insurance, new sales rose by 9.1%.       was expected to be completed in March 2008.

                                                                                                  In the savings sector, sales and new                As an active ABCP securities market did
                                                50                                                deposits grew by 4.5% in 2007 to total              not exist, Desjardins Financial Security’s
                                                                                                  $1,110.6 million in sales, despite a drop in        management estimated the fair value of
                                                                                                  individual annuity sales. Mutual fund sales         these securities using a valuation technique
                                                 0
                                                                                                  posted significant growth of 23.1% over 2006        based on a financial model that translates
                                                     2003


                                                               2004


                                                                         2005


                                                                                  2006


                                                                                          2007




                                                                                                  to total $636.3 million. Helios and Millennia       uncertainties regarding returns, underlying
                                                                                                  guaranteed fund sales totalled $151.7 million,      asset credit risk, cash inflows and maturities.
                                                                                                  for a marked increase of 32.4%. In group            The financial model reflects the particularities
                                                                                                  savings, sales amounted to $218.5 million,          of the structuring plans announced to date.
                                           The share of the Company’s net income
des ja r di ns fi na nc ial s ec ur it y




                                                                                                  a 24.8% decrease from 2006, when major              It also takes available market information and
                                           attributable to the ultimate shareholders,
                                                                                                  payout contracts were signed.                       realistic assumptions into account to arrive
                                           the Desjardins caisses, stood at $211.1 million,
                                                                                                                                                      at a fair value that reflects market conditions
                                           for a $65.3 million improvement over 2006.
                                           With a return on shareholder equity of 27.5%           non-BAnK-sPonsoRED                                  as at December 31.
                                           (20.7% in 2006), Desjardins Financial Security         AssET-BAcKED commERcIAL
                                                                                                                                                      The methodology used by the Company
                                           has one of the best rates in the financial             PAPER (ABcP)
                                           services industry. Thanks to its consistent                                                                factors in the restructuring plan’s probability
                                           performances year after year, the Company              The last six months of 2007 were marked             of success (conversion of ABCP securities
                                           continues to make a significant contribution           by turmoil on the financial markets worldwide       into term notes), as well as the probability
                                           to the profitability of Desjardins Group,              due mainly to a deteriorating global credit         of non-bank conduit underlying asset
                                           which at year-end 2007 declared combined               market. This situation triggered a drop in          liquidation scenarios.
                                           surplus earnings before member dividends               confidence in certain financial products,
                                           of $1,101.0 million.                                   such as asset-backed commercial paper from
                                                                                                         13


As the Company met the original contract           services. In individual insurance, priority will be
terms regarding the liquidity of ABCP              given to expanding our distribution networks
securities, among others, a decline in total       – which includes opening four new financial
value of $34.2 million resulting from the          centres in the Desjardins Financial Security,
valuation of these securities was recognized       Independent Network – and searching out
in its year-end results. The fair value that       profitable acquisition opportunities. In credit
is produced using the valuation method             and direct insurance, we will continue to work
described above may not be an indication           on initiatives launched in 2007 with a view to
of their ultimate net realizable value or future   signing new partnership agreements that will
market value. Although Management believes         allow us to offer these products in the credit
that the valuation technique is appropriate        unions, mainly to support Desjardins Group’s
under the circumstances, changes in the            deployment plan in this market.
significant assumptions, such as those used
to determine scenario probabilities, underlying    The third axis involves strengthening Desjardins
asset credit risk and the quality of the assets    Financial Security’s position as an alternative
held as collateral by non-bank conduits, could     to the three major life and health insurers
significantly alter the value attributed to ABPC   in Canada by being competitive on a cost
securities in the coming quarters.                 basis and making the most of our distinctive
                                                   advantages. In our relations with Desjardins
2008 oUTLooK                                       Group, we will actively promote our distinctive
                                                   advantage in terms of an integrated offer,
In 2008, Desjardins Financial Security will be     distribution, systems and processes. In our
undertaking the final phase of its three-year      other markets, we will differentiate ourselves
business plan. In connection with this plan,       by listening to our clients, by being flexible
we held two strategic planning sessions in         in the way we address the needs of both our
2007 which culminated in proposals to the          clients and our partners, and by designing
Board of Directors for updating our strategic      and efficiently delivering innovative financial
plan and focussing our strategies around four      security solutions that meet our clients’
main axes.




                                                                                                              mAn AGE mE n T REP oRT
                                                   every expectation.

The first axis involves supporting the             The fourth axis concerns our employees.
development of Desjardins Group by                 Considering the tremendous contribution
contributing to the financial security of caisse   they make to our collective success, we want
and Desjardins Business Centre members             to encourage our employees to empower
and participating in the Group’s profitability.    themselves in their areas of responsibility so
Our priority will be to maintain and develop       that we can execute and manage our projects
our existing business and optimize the             even more effectively. We also want to support
development of our target markets. We will         the work-life balance of our employees with
also continue to adapt our credit insurance        flexible work arrangements.
offer to the new credit products offered
by the caisse network and the Desjardins           Updating our 2006-2008 strategic plan during
Business Centres and adjust this offer to the      the year has enabled us to refocus our major
needs of our other expanding distribution          priorities and begin 2008 with conviction and
channels. We will also help the Fédération         enthusiasm. New challenges lie ahead and
des caisses Desjardins du Québec develop           we will successfully address them, as we have
offers and marketing strategies to serve its       addressed all other challenges in the past.
target clienteles.




                                                                                                              des ja r di ns fi na nc ial s ec ur it y
The second axis consists in accelerating the
development of our national market. With
this goal in mind, we will continue to make
inroads in our chosen markets. In group
insurance, the investments we have made
in our administration and claims systems will
make our clients’ direct transactions much
simpler for both our standard and flexible
offers. In group savings, we will continue
to simplify the administration and governance
of our accumulation plans by, among other
things, redesigning our online plan sponsor
                                           14




                                                                                                                                                In Quebec, the Company maintained its first
                                                     sEcToR By sEcToR AnALysIs                                                                  place ranking in group life insurance with a
                                                                                                                                                market share of 29.7% and a substantial lead
                                                                                                                                                over its closest competitor (18.0%).

                                                                                                                                                2007 REsULTs
                                           GROUP INSURANCE                                                                                      Net income for the group insurance sector,
                                                                                                                                                which includes Loan Insurance, jumped
                                           AcTIVITIEs AnD PRoDUcT                            sales offices across the country in order to       58.6% to stand at $160.3 million compared
                                           offERInGs                                         provide maximum accessibility to its products      to $101.1 million in 2006.
                                                                                             and services.
                                           Group insurance includes two areas of activity:
                                                                                                                                                        ChAnGeInneTInCoMe–GRouP
mAn AGE mE n T REP oRT




                                           the plans we offer groups and businesses and      We also provide group life and disability
                                                                                                                                                             InSuRAnCeSeCToR
                                           those we offer through financial institutions     plans to cover loans (credit insurance) and
                                                                                                                                                                  (in millions of dollars)
                                           such as the Desjardins caisses.                   life insurance plans (Savings-Life Insurance)
                                                                                             to cover deposits through financial institutions




                                                                                                                                                                                                  160.3
                                           For groups and businesses, we have plans          such as the Desjardins caisses in Quebec,
                                                                                             the Desjardins Credit Union branches in              175
                                           that provide life insurance, critical illness
                                           insurance, short-term and long-term disability    Ontario, and the French-language caisses
                                                                                                                                                  150
                                           insurance, health insurance, dental care          and other credit unions in Canada.


                                                                                                                                                                    104.9

                                                                                                                                                                              102.5
                                           insurance, as well as vision care and travel




                                                                                                                                                                                        101.1
                                                                                                                                                  125
                                           insurance. Our group plans stand apart from       In 2006, Desjardins Financial Security retained
                                                                                                                                                          83.0

                                           the rest because of their quality, flexibility    its fourth place ranking in group life insurance     100
                                           and the personalized service we offer our         in Canada, while increasing its premium
                                                                                                                                                   75
                                           policyholders, administrators and members.        volume by 6.1%. It also kept its fourth
                                           They are available across Canada through          place position in health insurance, recording         50
                                           group insurance representatives and consulting    premium volume growth of 10.7% and a
                                           actuaries. The Company also maintains             0.4% increase in market share.                        25

                                                                                                                                                    0
                                                                                                                                                           2003


                                                                                                                                                                     2004


                                                                                                                                                                               2005


                                                                                                                                                                                         2006


                                                                                                                                                                                                   2007
                                           DEsjARDIns fInAncIAL sEcURITy GRoUP InsURAncE
des ja r di ns fi na nc ial s ec ur it y




                                           mARKET shARE
                                                                                                  Rank      Market Share   Written Premiums
                                                                                                                      %                  $M
                                            canada
                                             Group Life
                                             2007                                                                                   419.1
                                             2006                                                  4th              8.1             382.7
                                             2005                                                  4th              8.0             360.6

                                                Group Health
                                                2007                                                                              1,570.8
                                                2006                                               4th             10.1           1,359.6
                                                2005                                               4th              9.7           1,228.4
                                                                                                                                                   All the tables showing the Company’s group insurance,
                                                                                                                                                   individual insurance and savings market shares in this
                                            Quebec                                                                                                 section and following sections are from an analysis of
                                             Group Life                                                                                            the 2006 annual statements filed with the Office of the
                                             2007                                                                                   327.6          Superintendent of Financial Institutions, Canada and
                                                                                                                                                   Quebec’s Autorité des marchés financiers. Data for 2007
                                             2006                                                  1st             29.7             315.1
                                                                                                                                                   will be available in the second quarter of 2008.
                                             2005                                                  1st             29.9             302.2
                                                                                                                                                         15


sALEs AnD PREmIUm GRowTh                              in Quebec and fourth in Canada, where our           2008 oUTLooK
                                                      market share has grown from 4.7% in 2003
At the end of fiscal 2007, group and business         to 5.1% in 2006.                                    For the benefit of our group and business
insurance sales totalled $237.3 million,                                                                  clients, we will continue to work on initiatives
crossing the $200-million mark for the first          In terms of our service offering to groups          undertaken in 2007 in order to continually
time and recording a 21.4% increase over              and businesses, we signed major contracts           improve our offer of flexible plans, add new
2006. In total, group insurance premiums,             across Canada in 2007. They include a               e-commerce facilities for our policyholders,
which include group and business insurance            partnership agreement with the Ontario              and enhance our employee health and
premiums and those for plans offered                  Hospital Association, which represents              wellness programs.
through financial institutions like the               70,000 health network workers, a group
Desjardins caisses, as well as an equivalent          insurance plan for the 11,000 members of            In credit insurance, we will continue to adapt
amount of premiums for ASO groups,                    the Newfoundland and Labrador Teachers’             our products to the caisses’ new financing
amounted to $2,005.1 million, compared                Association and another group insurance plan        options in order to make them more easily and
to $1,745.3 million in 2006. Two factors              covering 10,000 employees of Metro Inc. and         efficiently accessible to caisse borrowers. We
contributed to this substantial premium               its affiliates. We also developed tools that will   will also continue to prioritize actions that will
increase of 14.9% in 2007: major group and            enable us to expand our offer of flexible plans     ensure the satisfaction of partners and clients
business insurance sales and Loan Insurance           and launched the Health is cool! program            in order to maintain the very highest standards
growth. The total volume of insured credit            to promote the health and well-being of             of service quality. In our chosen markets
under loan life insurance and loan disability         employees. We include this program in our           outside Quebec, we will step up efforts to
insurance continues to rise.                          group insurance policyholders’ management           establish new partnership agreements with
                                                      toolkit to enhance their competitiveness,           the credit unions.
2007 hIGhLIGhTs                                       increase their productivity and reduce their
                                                      operating costs.
In group insurance, Desjardins Financial
Security enjoyed a record year with respect           With respect to products distributed to
to net business growth. Despite the fierce            Desjardins members via the caisse network,
competition, mainly in the Toronto and                our premium volume continued to grow
Montréal markets, the in-force compound               steadily in 2007. In credit insurance, we
annual growth rate has remained high for




                                                                                                                                                               mAn AGE mE n T REP oRT
                                                      extended our offer of coverage to the new
groups and businesses. In-force business,             financing products offered by the caisses
which stood at $36.5 billion in 2003, has             and Desjardins Business Centres (DBCs), such
grown to $61.1 billion in 2007. In terms of           as the Versatile Life of Credit for individuals
administered premiums* in this activity sector,       and Revolving Credit for businesses. We also
the Company ranks second among insurers               developed new ways of making credit
                                                      insurance available in the DBCs.



chAnGE In GRoUP InsURAncE PREmIUms By DIsTRIBUTIon nETwoRK
(in millions of dollars)

                                                                         2007               2006            2005              2004              2003
  Distributed to members of Desjardins Group                               507.5             481.6           452.3             424.6             398.9
  Other distribution networks                                            1,429.6           1,209.9         1,090.6           1,007.4             917.5
  Administered groups (ASO)                                                 68.0              53.8            50.8              54.3              46.7

  Total administered premiums                                           2,005.1            1,745.3         1,593.7           1,486.3           1,363.1




                                                                                                                                                               des ja r di ns fi na nc ial s ec ur it y




* Source: Fraser Group: Group Universe Report 2006.
                                           16




                                           INDIVIDUAL INSURANCE                                                                                                ChAnGeInInDIVIDuAlInSuRAnCe
                                                                                                                                                              PReMIuMSBYDISTRIBuTIonneTwoRk
                                                                                                                                                                           (in millions of dollars)




                                                                                                                                                                                                               392.6
                                           AcTIVITIEs AnD PRoDUcT                              In 2006, Desjardins Financial Security recorded




                                                                                                                                                                                                   374.2
                                                                                                                                                                                         362.4
                                           offERInGs                                           4% growth in individual life and health




                                                                                                                                                                             352.4
                                                                                                                                                                   345.4
                                                                                                                                                            400
                                                                                               insurance premiums over the previous year.
                                           In individual insurance, Desjardins Financial       In the Quebec market, where premium growth                   350
                                           Security strives to meet the financial planning     was 4.9% in 2006, the Company increased its
                                                                                                                                                            300
                                           and financial security needs of individuals,        market share by 0.1%.
                                           self-employed workers, and employees of                                                                          250
                                           small businesses by providing them with the         2007 REsULTs                                                 200
                                           three most common types of life insurance:
                                           permanent, term, and universal life. In the area        ChAnGeInneTInCoMe–InDIVIDuAl                       150
                                           of health insurance, the Company offers a                       InSuRAnCeSeCToR
                                                                                                                    (in millions of dollars)
                                                                                                                                                            100
                                           complete line of coverages that includes critical
                                           illness insurance and long-term care insurance.                                                                   50
                                           Other types of coverage, such as extended
                                                                                                                                                              0




                                                                                                                                                 47.1
                                           health care insurance, short- and long-term
                                                                                                  50




                                                                                                                                                                   2003


                                                                                                                                                                              2004


                                                                                                                                                                                         2005


                                                                                                                                                                                                    2006


                                                                                                                                                                                                               2007
                                                                                                                                43.0
                                           disability insurance, accident insurance,




                                                                                                                                         42.0
                                           and dental and vision care coverage, are
                                           also available.                                        40
                                                                                                                                                                     Distributed to Desjardins Group members
                                                                                                           29.1



                                           In Quebec, these products and services                                                                                    Other distribution networks
                                                                                                  30
                                           are distributed through 281 caisse-
                                                                                                                      18.8


                                           dedicated financial security advisors and
                                                                                                  20
                                           over 500 representatives affiliated with                                                                       In individual insurance, premium volume stood
                                           the 13 financial centres of SFL Partner of                                                                     at $392.6 million, up $18.4 million over 2006.
                                           Desjardins Financial Security. In the other            10                                                      The premium volume and number of contracts
mAn AGE mE n T REP oRT




                                           provinces, we offer our products and services                                                                  in force thanks to our caisse-dedicated
                                           through some 300 representatives affiliated             0                                                      network of financial security advisors grew
                                           with the 23 financial centres of Desjardins                                                                    by 21.1% and 14.1 % respectively over last
                                                                                                             2003


                                                                                                                      2004


                                                                                                                                2005


                                                                                                                                         2006


                                                                                                                                                 2007



                                           Financial Security, Independent Network,                                                                       year, while our direct distribution products
                                           as well as some 1,240 brokers and general                                                                      had a premium volume of $56.3 million for
                                           agents across Canada.                                                                                          an increase of 7.4%.
                                                                                               sALEs AnD PREmIUm GRowTh
                                           Some of our products, such as 50+ Life                                                                         2007 hIGhLIGhTs
                                           Insurance, Travel Insurance, Credit Balance         In 2007, individual insurance sales totalled
                                           Insurance and Accirance Personal Accident           $41.9 million for a $3.5 million improvement               In terms of the life and health insurance
                                           Insurance, are sold by direct distribution,         over 2006. This growth is due in part to sales             products and services sold to caisse members
                                           with or without the endorsement of                  recorded outside Quebec. Caisse-dedicated                  by caisse-dedicated financial security advisors,
                                           financial partners.                                 financial security advisors posted $16.5 million           in the fall of 2007 the Company reached a
                                                                                               in sales, up 6.5% over 2006.                               milestone with over 100,000 in-force Vision
                                                                                                                                                          contracts. The Vision environment offers a
                                                                                                                                                          comprehensive range of insurance coverages
                                                                                                                                                          in the event of death, disability, accident or
                                           InDIVIDUAL InsURAncE mARKET shARE                                                                              health-related problems. The financial security
                                                                                                                                                          advisors use the Vision series of coverages to
des ja r di ns fi na nc ial s ec ur it y




                                                                                                    Rank             Market Share      Written Premiums
                                                                                                                               %                     $M   provide caisse members with insurance tailored
                                                                                                                                                          to their particular needs. In 2007, we focussed
                                             canada                                                                                                       on the specialization of these financial security
                                              Individual life and health
                                                                                                                                                          advisors in order to meet the needs of our
                                              2007                                                                                              464.2
                                                                                                                                                          target markets more adequately.
                                              2006                                                     7th                     3.4              445.1
                                              2005                                                     7th                     3.5              427.9
                                                                                                                                                          With respect to the products and services we
                                                                                                                                                          offer individuals through our other distribution
                                             Quebec
                                              Individual life and health                                                                                  networks, we launched two basic critical
                                              2007                                                                                              336.4     illness insurance products, Harmony T10 and
                                              2006                                                     5th                   10.0               320.3     T20, which have now been integrated into
                                              2005                                                     5th                    9.9               305.4     the portfolio of coverages offered by our
                                                                                                                                                          SFL Partner of Desjardins Financial Security
                                                                                                                                                                17




                                                  SAVINGS                                             ChAnGeInneTInCoMe–SAVInGSSeCToR
representatives in Quebec and Desjardins
Financial Security, Independent Network                                                                                   (in millions of dollars)
representatives in the other provinces.
We also implemented a simplified approach
to long-term care benefits aimed specifically     AcTIVITIEs AnD PRoDUcT                                25
at individuals aged 40 to 60. In the area         offERInGs
of distribution, we harmonized our fund                                                                 20
                                                  This business sector covers retirement savings
management business processes. Lastly,
                                                  for individuals, groups and businesses.               15
we continued to work on national business




                                                                                                                                                        9.3
                                                                                                                                      8.9
development by adding four Desjardins




                                                                                                                                               8.2
                                                  The Company has a broad spectrum of                   10
Financial Security, Independent Network-




                                                                                                                            5.1
                                                  products for individuals and the self-employed,
affiliated financial centres in Nova Scotia,                                                             5
                                                  including guaranteed return investments,
Ontario and British Columbia.
                                                  multiple strategy investments, as well as              0
                                                  guaranteed investment funds and retirement
For those who buy our products through
                                                  annuities. These products are distributed
direct distribution, we improved the product
                                                  through our national financial centre network.




                                                                                                              2003 -6.1
information available on the Desjardins.com
                                                  In the Desjardins caisses in Quebec, we also
website in order to make the enrolment




                                                                                                                            2004


                                                                                                                                      2005


                                                                                                                                               2006


                                                                                                                                                        2007
                                                  offer retirement annuities as well as access
process easier. We also signed an insurance
                                                  to the Helios Contract which offers à-la-carte
product distribution agreement with a major
                                                  guarantees with a family of Guaranteed
endorser in the retail sector.
                                                  Investment Funds.
                                                                                                     In individual savings, sales amounted to
2008 oUTLooK                                      For groups and businesses, we have a
                                                                                                     $255.8 million, a level comparable to 2006.
                                                                                                     While annuity product sales declined across
In the area of the life and health insurance      complete range of group retirement savings
                                                                                                     the entire industry in 2007, guaranteed
products we offer Desjardins members through      products, including registered retirement plans,
                                                                                                     investment fund sales, on the other hand, rose
caisse-dedicated financial security advisors,     defined contribution plans, simplified pension
                                                                                                     23.0%. Desjardins Financial Security recorded
our priority will be to retain and develop        plans and a choice of specialized investment
                                                                                                     $151.7 million in guaranteed investment fund
                                                  instruments for defined benefit pension funds.




                                                                                                                                                                     mAn AGE mE n T REP oRT
our in-force business, and to optimize the                                                           sales for a 32.4% improvement over 2006.
development of target markets identified in       We also offer deferred profit-sharing plans,
                                                                                                     These results are due to a favourable financial
2007. We also plan to focus our attention on      individual pension plans designed specifically
                                                                                                     environment and to adjustments made to its
sales manager skills development and support      for company executives or shareholders.
                                                                                                     product offering in 2007.
in the coming year.                               These plans can also include non-registered
                                                  components to meet the particular needs
                                                                                                     In group retirement savings, despite
With regard to the life and health insurance      of companies and their employees. Our group
                                                                                                     a $12.6 million increase in the sale of
products we offer through our other               retirement savings products are distributed
                                                                                                     accumulation products, sales were down
distribution networks, we will continue our       mainly through consulting actuaries and
                                                                                                     $72.1 million from 2006 to stand at
national development efforts by identifying       brokers specializing in employee benefits
                                                                                                     $218.5 million. Quebec reported the strongest
new avenues for growth and opening four           or pension plans.
                                                                                                     growth in accumulation product sales, which
new Desjardins Financial Security, Independent                                                       totalled $70.5 million, for a $15.9 million
Network-affiliated financial centres, while       2007 REsULTs                                       improvement over 2006. Payout annuity sales
adjusting and optimizing certain aspects                                                             were down 41.0% from 2006 due in part to
                                                  Savings product sales totalled $1,110.6 million,
of our business model. We will also continue                                                         the disciplined approach to tenders Desjardins
                                                  a $48.2 million increase attributable mainly
to identify specific opportunities with general                                                      Financial Security applied in 2007 in order to
                                                  to mutual funds. The savings sector posted
agents interested in developing a business                                                           achieve its growth objectives while maximizing
                                                  net income of $9.3 million for a $1.1 million
relationship with us.                                                                                its profitability margins.
                                                  improvement over 2006.




                                                                                                                                                                     des ja r di ns fi na nc ial s ec ur it y
To support our offer of products sold by
direct distribution, we will be upgrading
our technological platforms, looking for new      sALEs – sAVInGs
partners and endorsers, ensuring a sustained      (in millions of dollars)
and targeted advertising presence and
                                                                                                      2007                     2006                   2005
maximizing web opportunities.
                                                    Group retirement savings                            218.5                      290.6               316.1
                                                    Individual savings                                  255.8                      254.9               236.6
                                                    Mutual funds                                        636.3                      516.9               461.7

                                                    Total                                            1,110.6                   1,062.4                1,014.4
                                           18


                                           2007 hIGhLIGhTs                                      In individual savings, we will support our
                                                                                                offer of lifetime annuities in the Desjardins
                                           In the fall of 2007, Desjardins Financial            caisse network with new technological tools,
                                           Security took a new direction in the area of         and by enhancing our sales support. The
                                           retirement planning solutions with the launch        Vision-Retirement program, which includes
                                           of Helios, its new Guaranteed Investment             the offer of payout annuities, will remain a
                                           Funds Contract. The contract offers an               priority objective that will require the ongoing
                                           à-la-carte approach that allows investors to         training of caisse personnel. We will continue
                                           customize their guarantees based on the              to improve the options we offer our clients
                                           events in their lives and to benefit from            in the payout phase and help the caisses with
                                           capital protection options like the Guaranteed       the distribution of guaranteed investment
                                           Minimum Withdrawal Benefit (GMWB). Under             funds through referrals. We also plan to
                                           the GMWB option, capital is reimbursed at            continue to improve our offer of variable
                                           the rate of 7% per year, the highest on the          rate guaranteed investment certificates and
                                           market for maximum flexibility. The contract         to make certain changes to the Guaranteed
                                           also reimburses a portion of the fees paid to        Minimum Withdrawal Benefit offered under
                                           protect investments. With this new contract,         the Helios Contract.
                                           Desjardins Financial Security is among the
                                           first financial institutions in Canada to actively
                                           combine innovative accumulation and payout
                                           strategies to better meet the needs of future
                                           generations of retirees.

                                           In the area of group retirement savings, we
                                           continued to work on integrating the offer
                                           of lifetime annuities into the Vision-Retirement
                                           program, a program geared to Desjardins
                                           caisse members approaching retirement or
                                           already retired. We also expanded the range
mAn AGE mE n T REP oRT




                                           of services we offer sponsors of retirement
                                           savings plans with the launch of the
                                           TRACE Lifecycle Environment. This dynamic
                                           environment is designed to adapt and evolve
                                           according to each participant’s needs. It
                                           takes into account the risk profile and age
                                           of the participants and provides them with
                                           the guidance and support they need as they
                                           work towards a financially secure retirement.
                                           TRACE is also a great tool for plan sponsors
                                           because it helps them manage their plans
                                           more effectively by providing them with
                                           an overall vision of their participants and
                                           investment guidelines.

                                           2008 oUTLooK
                                           In group retirement savings, we will continue
des ja r di ns fi na nc ial s ec ur it y




                                           to simplify the plan sponsor’s administration
                                           and governance of accumulation plans by
                                           completely redesigning our online services,
                                           among other initiatives. We will also be
                                           offering plan participants retirement solutions
                                           tailored to their needs through the TRACE
                                           Lifecycle Environment.
                                                                                                                                                                  19




                                                           depositors and clients using this disciplined              Our balance sheet in 2007, unlike 2006, was
            InVEsTmEnTs                                    approach despite the increased volatility on
                                                           the financial markets and the liquidity crisis
                                                                                                                      drawn up according to the new accounting
                                                                                                                      policies for financial instruments, based
                                                           that occurred in the summer of 2007.                       mainly on fair value as described in Note 2
                                                                                                                      to the financial statements included with
                                                           Investments consist mainly of fixed income                 this report. The application of these new
InVEsTmEnT PoRTfoLIo
                                                           securities, reflecting the Company’s liability             standards on January 1, 2007, had the effect
Portfolio structure                                        structure. We have an asset and liability                  of increasing the book value of investments
                                                           matching management group that ensures                     by $893.7 million. The coming into force
Desjardins Financial Security’s objective is
                                                           appropriate asset allocation of the portfolio              of these standards therefore generated
to prudently manage the risk/return ratio
                                                           as well as an internal committee that                      increased volatility in the book value of the
and control and reduce investment risk by
                                                           reviews this allocation to ensure it generates             Company’s investments. Asset growth in 2007
taking into account such factors as quality,
                                                           the desired return on shareholder’s equity                 reflects such factors as the change in the fair




                                                                                                                                                                        mAn AGE mE n T REP oRT
concentration, foreign currencies, maturities
                                                           while minimizing volatility. The Company’s                 value stemming from these new accounting
and guarantees. Investments are selected with
                                                           investment portfolio is well diversified by                standards and the Company’s business growth.
a view to maintaining a balance between
                                                           investment class.
profitability and portfolio risks. We managed
the funds entrusted to us by our insureds,




ALLocATIon of PoRTfoLIo By AssET cLAss
(in millions of dollars, unless otherwise indicated)

                                                          2007               January 1, 2007                           2006                          2005
  Bonds                                         8,449.8       57.0%           8,263.0        62.4%            7,802.8          63.3%          7,611.3       66.1%
  Mortgage loans and business loans             2,924.5       19.7%           2,433.3        18.4%            2,089.1          16.9%          1,896.7       16.5%
  Real estate                                     882.7        5.9%             487.6         3.7%              487.6           3.9%            415.7        3.6%
  Stocks                                        1,162.6        7.8%             596.4         4.5%              545.9           4.4%            465.2        4.0%




                                                                                                                                                                        des ja r di ns fi na nc ial s ec ur it y
  Cash and money market securities                486.7        3.3%             906.6         6.8%              906.6           7.3%          1,016.5        8.8%
  Policy loans                                    107.4        0.7%             108.7         0.8%              108.7           0.9%            108.4        1.0%
  Other loans and investments                     835.1        5.6%             445.0         3.4%              406.2           3.3%               —

                                              14,848.8      100.0%          13,240.6       100.0%            12,346.9         100.0%         11,513.8       100.0%




BonD PoRTfoLIo QUALITy
(in millions of dollars, unless otherwise indicated)

                                                                                                                       2007                          2006
  Government rating                                                                                         6,455.6            76.4%       5,726.3          73.4%
  AAA                                                                                                         831.7             9.8%         656.4           8.4%
  AA                                                                                                          402.5             4.8%         502.0           6.4%
  A                                                                                                           355.0             4.2%         464.4           6.0%
  BBB                                                                                                         367.5             4.4%         343.8           4.4%
  BB, under or not listed                                                                                      37.5             0.4%         109.9           1.4%

                                                                                                        8,449.8	          	   100.0%       7,802.8          100.0%
                                           20


                                           fixed Income securities                            stocks                                                              of active investment portfolio management
                                                                                                                                                                  operations and the securities lending program
                                           The value of the bond portfolio grew from          In order to increase diversification by asset
                                                                                                                                                                  of Desjardins Trust, the Company’s asset
                                           $8,263.0 million as at January 1, 2007 to          class, the Company invests in stocks and
                                                                                                                                                                  custodian. These loans constitute short-term
                                           $8,449.8 million as at December 31, 2007.          hedge funds. These investments are mainly
                                                                                                                                                                  securities purchases, with a simultaneous
                                           This modest growth in bond value compared          used for the matching of products that
                                                                                                                                                                  commitment to resell them at a predetermined
                                           to 2006 is due to business growth. However,        transfer all returns to clients. They are also
                                                                                                                                                                  date and price. The item also includes
                                           the relative weight of bonds in the overall        used for market exposure in order to boost
                                                                                                                                                                  immigrant investor loans.
                                           balance sheet assets declined in favour of         portfolio profitability.
                                           other assets classes, in particular real estate
                                           and stocks.                                        Hedge funds invested directly in funds are                          nET InVEsTmEnT IncomE
                                                                                              accounted for in common shares under                                Following the enactment of the new
                                           Bonds include non-bank asset-backed                “Stocks”. The Company also invests in                               accounting standards for financial instruments
                                           commercial paper (ABCP) valued at $161.2           hedge funds using derivative products for                           in 2007, the composition of net investment
                                           million as at December 31, 2007, following         the purpose of matching client products.                            income was modified, in particular by
                                           a permanent depreciation of $34.2 million.         They are accounted for in other financial                           replacing the book value of financial
                                                                                              derivative products under “Other loans                              instruments by their fair value. Desjardins
                                           The quality of the bond portfolio remained         and investments”.                                                   Financial Security’s net investment income
                                           high in 2007. The listed portion totalled                                                                              includes mainly interest and dividend income,
                                           $8,447.4 million at year-end and accounted         The higher balance under “Stocks” is largely                        net rental income from real estate, the change
                                           for almost the entire bond portfolio.              due to an increase in direct hedge fund                             in the fair value of assets held for trading,
                                           Government bonds represent 76.4% of the            holdings and favourable market fluctuations.                        the amortization of realized and unrealized
                                           portfolio, with 95.2% of the bond securities                                                                           gains and losses on its real estate investments,
                                           rated A or higher.                                 Derivatives                                                         as well as gains and losses realized on the
                                                                                              Desjardins Financial Security uses marketable                       disposal of assets available for sale.
                                           mortgage loans and business loans
                                                                                              securities and derivatives to manage asset
                                           The portfolio of outstanding mortgage and          and liability matching in order to protect itself                   As at December 31, 2007, the Company’s
                                           business loans increased by $491.2 million to      against market, interest rate and currency                          investment income stood at $514.3 million,
mAn AGE mE n T REP oRT




                                           stand at $2,924.5 million as at December 31,       risks. Derivatives also serve to eliminate the                      down 23.7% from 2006. These results
                                           2007. During the first three quarters, the         market risk associated with the sale of certain                     are due in part to the new accounting
                                           ample funds available for commercial real          products and improve the risk/return trade-off.                     standards for financial instruments which
                                           estate financing created fierce competition.       All derivatives are subject to the Company’s                        affect mainly bonds, stocks and derivative
                                           However, towards the end of the third quarter,     credit standards, financial controls and other                      products. These new standards resulted in
                                           there was significant tightening in part           typical monitoring procedures and are not                           fair value adjustments in 2007, compared
                                           because many issuers of mortgage-backed            used for speculation. The derivatives are                           to amortizations of gains and losses in 2006.
                                           securities were affected by the liquidity crisis   measured at fair value.                                             The decline in net investment income is
                                           and had to cease their activities. The quality                                                                         also due to the financial markets’ negative
                                           of the mortgage loan portfolio remains             other loans and investments                                         performance, particularly with respect
                                           impressive. The average mortgage loan rating                                                                           to the credit sector and the non-bank-
                                                                                              This item includes, in particular, reverse                          sponsored ABCP.
                                           is “very good quality”. In addition, insured
                                                                                              repurchase agreements entered into as part
                                           mortgages represent 77.6% of the mortgage
                                           loan portfolio. The net balance of non-
                                           performing assets represents less than 0.1%
                                           of the entire investment portfolio.                nET InVEsTmEnT IncomE By VEhIcLE
                                                                                              (in millions of dollars, unless otherwise indicated)
                                           Real Estate                                                                                                             2007              2006             2005
des ja r di ns fi na nc ial s ec ur it y




                                           The value of the Company’s real estate               Bonds
                                           holdings nearly doubled in 2007 due mainly             Interest                                                           356.4            403.7             410.1
                                           to the acquisition of the complexe Desjardins          Gains (losses)                                                    (127.2)            65.1              65.1
                                           in Montréal and the buildings on the Lévis           Stocks
                                           campus formerly owned by the Fédération                Dividends                                                           12.7              6.5               5.5
                                           des caisses Desjardins du Québec and                   Gains (losses)                                                       9.2             43.9              33.6
                                           Desjardins General Insurance Group. These            Mortgage loans and business loans                                    146.0            107.8             115.3
                                           acquisitions, which are concentrated in              Real estate*                                                          69.4             40.5              48.1
                                           Québec’s office building sector, are behind          Cash and money market securities                                      19.8             20.6              13.1
                                           the Company’s decision to divest itself of           Policy loans                                                           8.1              7.9               7.1
                                           the Cité du commerce électronique property           Other loans and investments                                           48.5              7.0               1.5
                                           in Montréal. As at December 31, 2007,                Investment management fees                                           (28.6)           (28.9)            (27.4)
                                           the fair value of the real estate portfolio was
                                           considerably higher than its carrying value.                                                                             514.3	            674.1             672.0

                                                                                              * Income from real estate is presented net of operating expenses.
                                                  21


The revenue increase recorded under
“Mortgage loans” is due mainly to a higher
volume of loans.

The positive growth in revenue recorded
under “Real estate” is derived from a portfolio
increase following acquisitions during the
year. The acquisitions made by the Company
in 2007 allowed it to add high quality
investments to the real estate portfolio.

“Other loans and investments” now takes
into account all derivative product positions,
whereas in previous years, these were
presented under accounting items, which were
more representative of the underlying asset.
The revenue recognized on derivative financial
instruments amounted to $57.8 million as
at December 31, 2007. The wide variation
in the exchange rate had a positive effect
on net investment income under this item.
The Company recorded gains on foreign
exchange forward contracts transacted to
ensure coverage of a portion of the exchange
risk tied to stock holdings denominated in
U.S. dollars.




                                                       mAn AGE mE n T REP oRT
                                                       des ja r di ns fi na nc ial s ec ur it y
                                           22




                                                                                                                                                mainly to pay claims, make annuity and
                                                      AnALysIs of fInAncIAL PosITIon                                                            surrender payments, purchase investments,
                                                                                                                                                and cover operating expenses, taxes, as well
                                                                                                                                                as policyholder and shareholder dividends.


                                           cAPITALIzATIon                                     fInAncInG                                         The Company’s main investments in 2007
                                                                                                                                                included the acquisition of Place Desjardins Inc.
                                           Under its provincial charter, Desjardins           As at December 31, 2007, Desjardins Financial     (PDI) and certain buildings owned by the
                                           Financial Security is governed by the Autorité     Security and its subsidiaries had operating       Fédération des caisses Desjardins du Québec
                                           des marchés financiers (AMF). The Company          lines of credit in the amount of $44.0 million.   and Desjardins General Insurance Group. Our
                                           must also comply with the standards enacted        These lines of credit are used when necessary     main financing activities in 2007 included
                                           by the regulatory authorities of the other         to finance the Company’s activities and meet      the repayment of PDI mortgage bonds in the
                                           provinces and territories where it conducts        temporary working capital needs. As at            amount of $120.7 million and the payment of
mAn AGE mE n T REP oRT




                                           business. Insurance companies that operate         December 31, 2007 and 2006, none of               a dividend in the amount of $226.0 million.
                                           in Quebec must guarantee their solvency            these lines had been used.
                                           by complying with the capital adequacy                                                               RELATED PARTy TRAnsAcTIons
                                           requirements set out by the AMF. At the            cAsh fLows
                                           end of 2007, Desjardins Financial Security’s                                                         Desjardins Financial Security conducts
                                           capital adequacy requirements ratio exceeded       The financial position of an insurance company    transactions with other Desjardins Group
                                           regulatory authority requirements, thus            changes in accordance with its cash inflows       entities. The contracts governing these
                                           guaranteeing optimal security for insureds.        and outflows. Its primary sources of funds are    transactions are submitted to the Company’s
                                                                                              premiums collected under in-force insurance       Ethics Committee and Board of Directors.
                                           This excess amount gives the Company               and annuity contracts, amounts generated          The Board ensures, among other things, that
                                           financial flexibility to use the surplus capital   by the sale or recovery of investments, income    the contract conditions are comparable to
                                           in keeping with its priorities of maintaining      collected on its investment portfolio, and        those on the market. The table in Note 19 to
                                           growth, financing acquisitions where               other income, including segregated fund           the financial statements presents a summary
                                           opportunities exist, and increasing dividends      management fees. These amounts are used           of these transactions.
                                           to its shareholder. During the year, the
                                           shareholder invested an additional amount
                                           of $85.2 million in the form of Class A
                                           shares to maintain this financial flexibility,
                                           while acquiring certain Desjardins Group           cAsh fLows
des ja r di ns fi na nc ial s ec ur it y




                                                                                              (in millions of dollars)
                                           administration buildings, including the
                                           complexe Desjardins.                                                                                  2007              2006              2005
                                                                                                Cash flows associated with the following
                                           DIVIDEnDs                                             activities:
                                           In addition to policyholder dividends,                Operating activities                              799.8             746.5          1,406.4
                                                                                                 Investing activities                             (755.5)           (857.9)          (771.6)
                                           the amount of which is approved by the
                                                                                                 Financing activities                             (315.8)           (144.0)          (211.7)
                                           Company’s Board of Directors, the Company
                                                                                                 Other                                                —                 —             101.7
                                           pays annual dividends to its sole shareholder.
                                           However, the dividend policy in place
                                                                                                Increase (decrease) in cash and cash
                                           allows the Company to ensure its growth
                                                                                                  equivalents                                     (271.5)           (255.4)           524.8
                                           and maintain an acceptable capitalization
                                                                                                Cash and cash equivalents – beginning
                                           ratio. During the period, the Company                  of year                                          557.2             812.6            287.8
                                           declared dividends totalling $245.6 million
                                           in favour of its ultimate shareholders,              cash and cash equivalents – end of year           285.7              557.2            812.6
                                           the Desjardins caisses.
                                                                                                                                                     23




commITmEnT: oUTsoURcInG
conTRAcTs                                                  sIGnIfIcAnT AccoUnTInG PoLIcIEs
From time to time, Desjardins Financial
Security uses long-term outsourcing contracts
that allow it to focus on its core activities    The Company’s significant accounting policies     price of similar financial instruments or by
and improve customer service. For instance,      are summarized in Note 2 to the consolidated      discounting the cash flows at market interest
the Company has a contract with ESI Canada       financial statements. Some of these policies      rates, which are applied to the forecasted
for the electronic processing of health claims   are considered critical because they require      amounts until the maturity date. Differences
(prescription drugs and dental insurance)        the Company to make judgments based               between the assumptions and the actual
under its group insurance plans. It also has a   on assumptions and estimates on as yet            results may produce different fair values and
contract with the firm CGI for the operation     unresolved issues, and because actual results     financial results.
and management of mainframe specialized          may differ from such estimates. As part of




                                                                                                                                                            mAn AGE mE n T REP oRT
processing services and with Desjardins Asset    the financial monitoring and reporting process,   fUTURE chAnGEs In
Management, a subsidiary of Desjardins           these judgments are reviewed periodically.
                                                                                                   AccoUnTInG PoLIcIEs
Group, for the management of its assets.         Accounting policies that make use of estimates
Lastly, since January 1, 2008, the Company       are implemented uniformly in establishing         On January 1, 2007, the Company adopted
has been contributing to the implementation      the Company’s financial results.                  the new standards of the Canadian Institute
of the Desjardins Specialized Savings Back                                                         of Chartered Accountants (CICA) entitled
Office Shared Services Centre (involving         KEy EsTImATEs                                     “Financial Instruments – Recognition
operations that are not in direct contact                                                          and Measurement” (Section 3855),
with clients.)                                   The accounting principles implemented             “Comprehensive Income” (Section 1530),
                                                 by the Company require Management to              “Hedges” (Section 3865), and “Life Insurance
                                                 make assessments based on assumptions or          Enterprises – Specific Items” (Section 4211).
                                                 estimates that may, in some cases, depend
                                                 on information of an uncertain nature.            financial Instruments – Recognition
                                                                                                   and measurement
                                                 Policy Liabilities In calculating policy
                                                 liabilities and other liabilities related to      This standard specifies that all financial
                                                 insurance contracts, certain assumptions          assets must be measured at fair value except
                                                 must be made as to when many factors              for loans, receivables and investments held
                                                 (death, disability, investment income,            to maturity, which are to be measured at




                                                                                                                                                            des ja r di ns fi na nc ial s ec ur it y
                                                 inflation, contract terminations, expenses,       amortized cost. The change in the fair value
                                                 taxes, premiums, commissions, policyholder        of those held for trading is recognized in
                                                 dividends, and so on) will come into play and     the statement of net income for the period,
                                                 what amounts will be involved. The Company        whereas the change in the fair value of those
                                                 uses best estimate assumptions to forecast        classified as available for sale is accounted for
                                                 claims experience. As certain assumptions         as other comprehensive income until they are
                                                 concern events that are likely to occur in the    finally disposed of, at which time the change
                                                 distant future, they will eventually have to      in fair value will be recognized.
                                                 be modified at some later date. The main
                                                 actuarial assumptions are described in Note 7     Financial liabilities are measured at fair value
                                                 to the Financial Statements.                      if they are derivatives or held for trading;
                                                                                                   other liabilities are measured at cost. Actuarial
                                                 financial instruments measured at fair            liabilities continue to be recognized using
                                                 value The fair value of financial instruments     the Canadian Asset Liability Method, which
                                                 is determined on the basis of current             is described in Note 2 to the consolidated
                                                 market prices. When these market prices           financial statements for a description of this
                                                 are not available, the Company determines         method. However, changes in the recognition
                                                 the fair value by using either the market         of financial assets will affect actuarial liabilities.
                                           24


                                           Section 3855 allows all financial assets and         Sections 3862 and 3863 will replace
                                           liabilities to be designated as “held for            Section 3861 “Financial Instruments
                                           trading” when they are initially recognized          – Disclosure and Presentation”. Section 3863
                                           or when this standard is adopted. These              carries forward unchanged the presentation
                                           financial instruments designated in accordance       standards contained in Section 3861. Section
                                           with the fair value option are subject               3862 ensures that users have the information
                                           to the requirements of the Autorité des              they need to better understand and evaluate
                                           marchés financiers.                                  the significance of financial instruments for
                                                                                                the entity’s financial position and performance,
                                           comprehensive Income                                 and also to better evaluate the nature and
                                                                                                scope of the risks associated with the financial
                                           Other comprehensive income includes,
                                                                                                instruments and how these risks are managed.
                                           in particular, changes in the fair value of
                                           available-for-sale financial assets until they are
                                                                                                As these new standards apply specifically
                                           disposed of. The statement of comprehensive
                                                                                                to disclosure, they will have no impact on
                                           income and accumulated other comprehensive
                                                                                                the Company’s results.
                                           income will be presented under participating
                                           policyholders’ equity and shareholder’s equity.

                                           hedges
                                           This section establishes the standards
                                           governing when hedge accounting may be
                                           applied. The purpose of hedge accounting,
                                           which is optional, is to ensure that
                                           counterbalancing gains, losses, revenues and
                                           expenses are recognized in the statement
                                           of income in the same period.
mAn AGE mE n T REP oRT




                                           Life Insurance Enterprises –
                                           specific Items
                                           Life insurance enterprises account for financial
                                           assets that fall under Section 3855 in the same
                                           way as other entities.

                                           Impact of new standards for
                                           financial instruments
                                           The adjustments arising from the new method
                                           of measuring financial assets classified as
                                           available for sale were recognized under
                                           the opening balance of accumulated other
                                           comprehensive income. Other transition
                                           adjustments related to the adoption of
                                           Sections 1530, 3855, 3865 and 4211 were
                                           recognized in the opening balance of retained
                                           earnings as at January 1, 2007. The adoption
                                           of these new standards has not materially
des ja r di ns fi na nc ial s ec ur it y




                                           impacted the Company’s risk management
                                           policies or its hedging activities. In compliance
                                           with CICA guidelines, data from the previous
                                           periods were not restated.

                                           fUTURE AccoUnTInG chAnGEs
                                           In December 2006, CICA published new
                                           accounting standards entitled “Capital
                                           Disclosures” (Section 1535), “Financial
                                           Instruments – Disclosure” (Section 3862)
                                           and “Financial Instruments – Presentation”
                                           (Section 3863). The Company will start to
                                           apply these standards on January 1, 2008.

                                           Under Section 1535, entities are required
                                           to disclose information that will enable
                                           users of financial statements to evaluate
                                           the entities’ capital objectives, policies and
                                           management procedures.
                                                                                                                                                    25




                                                                                                       of risks related to the financial reporting
          coRPoRATE GoVERnAncE                                                                         process, the internal and external audit
                                                                                                       processes and the procedures implemented;
                                                                                                       examines the management of regulatory
                                                                                                       compliance; and carries out any other
GoVERnAncE PoLIcy                                   ExEcUTIVE commITTEE                                mandates it receives from the Board of
                                                                                                       Directors. The Committee also ensures the
Recognizing the importance of sound and             The Executive Committee has the authority to       independence of the external auditor, the vice-
prudent management, Desjardins Financial            act as a substitute for the Board of Directors     president of Internal Audit and Compliance
Security’s Board of Directors (“the Board”)         and exercise all the powers of the Board           (who reports to the Committee) and the
has developed a Governance Policy aimed             in the administration of the Company’s             Appointed Actuary.
at achieving high standards. This policy, which     business, except the powers which, under the
applies to the Company and all its subsidiaries,    applicable legislation, the Board is required      With respect to financial reporting, the Audit




                                                                                                                                                          mAn AGE mE n T REP oRT
defines the roles and responsibilities of           to exercise, as well as those powers the           Committee reviews the Company’s quarterly
the Board of Directors and its various              Board expressly reserves for itself via by-law.    and annual consolidated financial statements,
committees, as well as the key responsibilities     Among other responsibilities, the Executive        including the supporting documents, and
of its directors and the governance methods         Committee conducts studies and makes               recommends their approval to the Board.
applicable to the Board.                            recommendations to the Board concerning            The Committee ensures the quality and
                                                    the Company’s human resources philosophy,          integrity of the financial information presented
BoARD of DIREcToRs                                  general collective bargaining mandates, major      and published in accordance with generally
                                                    human resources management policies and            accepted accounting principles and the use
The Board of Directors, in keeping with the         programs, the total compensation policy            of appropriate accounting practices. Quarterly
Company’s mission and the strategic plan of its     for managers and employees, significant            and annually, the Audit Committee reviews
sole shareholder, is responsible for establishing   changes to the various components of the           the reports produced for the regulatory
and monitoring the Company’s strategic and          total compensation portfolio, annual salary        authorities and ensures they comply with
operational plans, all proposed issues of share     changes, and the General Staff Incentive           the requirements of these authorities.
capital, the financial plan, operating and          Plan. In addition, the Executive Committee
investment budgets, financial statements,           recommends to the Board of Directors               The Audit Committee is also charged with
dividend declarations, financial and strategic      a general description of the duties and            ensuring that Management has developed
news releases. Management’s objectives, the         responsibilities of Board members as well          and implemented an effective internal
compensation policy, profit-sharing plans,          as the annual objectives of the Board and          control system for the disclosure of financial
the three-year human resources and succession       Executive Committee, and assesses their level      information, custody of assets, detection of




                                                                                                                                                          des ja r di ns fi na nc ial s ec ur it y
plan and the charter of the Audit Committee         of achievement. Jointly with the Chair of the      fraud, and regulatory compliance. In terms
also fall within the Board’s jurisdiction.          Board, the Executive Committee establishes         of risk management, the Committee ensures
                                                    a process for measuring the effectiveness and      that Management has systems in place to
The Board, which is responsible for the             assessing the performance of the Board and         manage the principal risks that could impact
Governance Policy, appoints the members             its committees. The Executive Committee is         the Company’s financial performance and
of Board committees and determines their            also responsible for overseeing the Company’s      also establishes risk management policies
mandates. It adopts the Company by-laws,            governance, determining the actions needed         for recommendation to the Board.
general framework policies and policies             to ensure effective and efficient governance
for sound financial management and risk             and recommending measures to the Board             EThIcs commITTEE
management; it also oversees the identification     for the execution of this mandate.
of the Company’s principal risks, the                                                                  The Ethics Committee is responsible for
integrated management of those risks, and           AUDIT commITTEE                                    establishing and ensuring compliance with
the implementation of the required controls                                                            ethical standards for the Company. More
and reporting processes. In addition, the Board     The Audit Committee, which is responsible          specifically, the Committee is charged with
approves the Senior Management Committee’s          for supervising the financial reporting process,   approving the rules set forth in Desjardins
mandate, ensures the implementation of a            reviews the quarterly and annual financial         Financial Security’s Code of Ethics and
succession plan for Company managers, and           statements and the presentation of financial       Professional Conduct, ensuring their
approves proposed partnerships, acquisitions,       information; ensures the effectiveness of          implementation and immediately reporting
sales, mergers and reorganizations.                 the internal control system, the management        any serious breach of these rules to the Board
                                           26




                                           of Directors. These rules bear, in particular,
                                           on the Company’s conduct toward interested
                                                                                                         BUsInEss RIsKs AnD
                                           persons, related parties or persons with ties                 conTRoL mEAsUREs
                                           to its officers or directors, the formalities
                                           and conditions of contracts with interested
                                           persons, and the protection of confidential        RIsK mAnAGEmEnT                                     credit Risk
                                           information held by the Company on insureds.
                                           The Ethics Committee is also responsible for       Risk control The Company’s risk                     Credit risk is defined as the risk of losses
                                           assessing any ethical situations or dilemmas       management goal is to optimize the risk/return      resulting from the failure of a counterparty
                                           brought to its attention with respect to the       ratio for all its operations. Risk is defined as    to settle its balance-sheet or off-balance
                                           Company’s values, principles and rules of          an element of uncertainty that may have an          sheet contractual obligations and
                                           ethics and conduct, and is empowered to issue      impact on existing or future income. Risk is        includes concentration risk. The term
                                           opinions, observations and recommendations.        minimized by implementing risk management           “counterparty” includes issuers, debtors,
mAn AGE mE n T REP oRT




                                                                                              strategies, policies and control processes          borrowers, brokers, underwriters, reinsurers,
                                                                                                                                                  and guarantors.
                                           InVEsTmEnT commITTEE                               incorporated into all organizational functions.

                                           The Investment Committee’s responsibilities        Desjardins Financial Security has adopted a         General underwriting standards ensure
                                           include determining the Company’s investment       risk-management governance structure by             portfolio diversification and prudent credit
                                           policies and recommending them to the              setting up an Integrated Risk Management            risk management with respect to loans
                                           Audit Committee; ensuring these policies are       and Reinsurance department as well as               granted by the Company. An internal credit
                                           implemented and enforced; analyzing changes        Integrated Risk Management and Operational          rating system makes it possible to evaluate
                                           to these policies; and suggesting any necessary    Risk Management Committees. Their mandate           portfolios and quickly identify impaired
                                           amendments or adjustments. The Committee           is to implement and oversee the policies            loans; an independent credit division
                                           must also ensure that the policies cover all       and systems designed to maintain financial          reviews the lending process; and specialized
                                           types of Company investments. It approves          and operational risk at levels acceptable to        staff are responsible for loan supervision,
                                           the investment strategies and analyzes returns,    Management and the Board of Directors.              management and recovery.
                                           and ensures the Company complies with              The Company has also developed a risk
                                           the sound and prudent practices prescribed         profile that identifies the risks it faces, the     Various policies dictate limits according
                                           by the Autorité des marchés financiers             level of exposure to each type of risk and          to commitment, issuer, borrower, group
                                           governing the management of interest               the effectiveness of the mitigating control         of borrowers, region and activity sector,
                                           rate risk, credit risk, liquidities, exchange      measures. The Integrated Risk Management            and establish the approval levels for all
                                           rate risk, securities portfolios, real estate      and Reinsurance department reports                  new commitments. Furthermore, specific
des ja r di ns fi na nc ial s ec ur it y




                                           appraisal, and derivatives. In addition, the       regularly on risk management to the Senior          provisions are set aside for non-performing
                                           Investment Committee reviews the choice            Management Committee and the Board                  financial instruments.
                                           of fund managers retained by the Savings           of Directors.
                                           and Segregated Funds division for its individual                                                       market Risk
                                           segregated funds and group investment              Internal Audit independently evaluates the          Market risk is the risk of changes in
                                           funds. Lastly, the Committee approves the          processes, systems and controls in place,           the value of financial vehicles due to
                                           investments that fall within its jurisdiction.     submitting progress reports and making              fluctuations in the parameters affecting that
                                                                                              appropriate recommendations.                        value—in particular interest rates, exchange
                                                                                                                                                  rates, credit spreads and volatility.
                                                                                              Desjardins Financial Security classifies its main
                                                                                              risks according to seven major categories           To protect itself against losses stemming
                                                                                              as follows:                                         from interest rate changes, the Company
                                                                                                                                                  has established a policy for matching
                                                                                                                                                  assets and liabilities and regularly ensures
                                                                                                                                                  compliance with the policy, which clearly
                                                                                                                                                  defines acceptable risks. The assets of each
                                                                                                                                                  sector are managed in accordance with
                                                                                                                                                  27


that sector’s liabilities, by investing assets    • Failure to meet obligations to clients           Reputation Risk
in vehicles that meet the requirements of           with regard to product design and
                                                                                                     Reputation risk is defined as the risk
the associated products.                            business practices;
                                                                                                     associated with a poor perception of
                                                  • Damage to physical assets;                       the Company by clients, counterparties,
The risks associated with mismatching of
                                                  • Service and system disruption/failure;           partners, regulatory authorities or the
investment portfolio durations, mismatching
                                                                                                     general public.
of cash flows, asset prepayment exposure          • Execution, delivery and process
and pace of asset acquisition are quantified        management errors.
                                                                                                     Reputation risk very often stems from other
and reviewed regularly.
                                                                                                     risks to which the Company is exposed.
                                                  To reduce this risk, the Company has set
                                                                                                     To reduce reputation risk, Desjardins
To improve its risk management                    up an organizational structure that favours
                                                                                                     Financial Security strives to provide a high
framework, the Company also uses the              appropriate segregation of duties, ensures
                                                                                                     level of customer service and has adopted
concepts of “value at risk” and “maximum          it has properly trained and competent
                                                                                                     a complaint management policy that serves
acceptable risk.”                                 staff at all levels of the organization
                                                                                                     as a framework for a dispute resolution
                                                  and delegates decision-making powers
                                                                                                     process. A dispute resolution officer
Liquidity Risk                                    effectively. It has also adopted policies,
                                                                                                     evaluates the soundness of the Company’s
                                                  procedures and processes that are
Liquidity risk is the risk that the Company                                                          decisions and practices in the event clients
                                                  periodically audited by internal auditors
will not be able to collect sufficient funds to                                                      feel they have not received the product or
                                                  and carries insurance coverage. It also has a
meet balance sheet and off-balance sheet                                                             service to which they were entitled.
                                                  business continuity plan in place, as well as
financial obligations, whether due or not.
                                                  incident management procedures that have
                                                                                                     The Company has also implemented a
                                                  proven to be effective in simulation tests.
Short-term liquidity is managed to ensure                                                            general reputation risk management policy
                                                  Work on the implementation of a risk and
sufficient funds are available when financial                                                        and regularly monitors various indicators.
                                                  control self-assessment program continues
commitments become due. Strategic
                                                  within Desjardins Group in order to meet
liquidity is managed to ensure stability                                                             strategic Risk
                                                  the registration requirements of the Autorité
between the sources and use of funds in a
                                                  des marché financiers in keeping with the          Strategic risk stems from business plans and
permanent context, taking into account the
                                                  Basel Accord.                                      strategies, the decision-making process, the
economic, operational and business factors




                                                                                                                                                       mAn AGE mE n T REP oRT
                                                                                                     allocation and use of Company resources,
that could influence this balance.
                                                  Insurance Risk and Reinsurance Risk                or the failure to adapt to changes in its
                                                                                                     operating framework.
A liquidity policy ensures the                    In the normal course of operations, the
comprehensive, proactive management               Company is exposed to insurance risk,
                                                                                                     The Company is developing an overall
of balance sheet items by setting limits.         which takes two forms: the product design
                                                                                                     strategic risk management policy to
Portfolio managers also guarantee that            and pricing risk and the underwriting and
                                                                                                     ensure that the decision-making process
an adequate proportion of assets is held          claim settlement risk.
                                                                                                     is in line with best practices. Various
in easily marketable securities.
                                                                                                     initiatives for continuously improving the
                                                  Insurance product design and pricing
                                                                                                     Company’s control environment are also
Desjardins Financial Security has developed       risk is the risk that initial rates may be
                                                                                                     being developed.
a contingency plan that describes available       inadequate or become so. It is related
sources of financing and their respective         to the possibility that forecasts involving
priority and cost. As well, the Company has       factors such as future investment yields,        REGULAToRy comPLIAncE
lines of credit to facilitate the financing of    mortality, morbidity, and administrative fees    AnD soUnD mAnAGEmEnT
its operations and meet temporary working         are inaccurate. The Company applies strict       PRAcTIcEs
capital requirements. At December 31,             pricing standards and policies and regularly
2007, none of these lines had been used.          compares assumptions with actual results.        Desjardins Financial Security has an overall
                                                  Moreover, certain products allow for price       regulatory compliance policy designed to
                                                  adjustments based on whether assumptions         ensure continuous monitoring of regulatory




                                                                                                                                                       des ja r di ns fi na nc ial s ec ur it y
operational Risk
                                                  are borne out.                                   compliance. This policy, which reflects a
Operational risk is the risk of loss, of an                                                        decentralized compliance management
inability to meet objectives, or of a negative                                                     approach, specifies the roles and
                                                  Underwriting and claim settlement risk
impact on the Company’s reputation                                                                 responsibilities at each level of the Company.
                                                  stems from selection, claim settlement
resulting from inadequate or failed internal
                                                  and the management of contract clauses.
processes, people and systems, or from                                                             A Regulatory Compliance Program was
                                                  Desjardins Financial Security manages this
external events.                                                                                   implemented under this policy in order to
                                                  risk by establishing appropriate underwriting
                                                  criteria and policies, and by limiting its       provide the structure and support required
In keeping with the classification used in                                                         to manage regulatory risk, in particular by:
                                                  exposure to losses through the use of
the New Basel Capital Accord, Desjardins
                                                  reinsurance treaties.                            • Describing each sector’s main activities;
Financial Security subdivides operational risk
as follows:                                                                                        • Identifying provisions related to each
                                                  The Company uses these reinsurance
                                                                                                      sector’s activities and determining the level
• Internal fraud;                                 treaties to cover policies with face values
                                                                                                      of risk for each one;
• External fraud;                                 that exceed certain maximums, which vary
                                                  according to the type of activity. It also has   • Describing the controls in place;
• Employment, workplace safety and
                                                  additional coverage against major disasters.
  human resources management practices;
                                           28


                                           • Monitoring the action plans resulting              mAnAGEmEnT AnD
                                             from significant variances and cases of            PRoTEcTIon of PERsonAL
                                             non-compliance;
                                                                                                InfoRmATIon
                                           • Having a report-production process
                                             (including the annual statement).                  Desjardins Financial Security has adopted
                                                                                                a policy and guidelines governing the
                                           Desjardins Financial Security complies with          management and protection of personal
                                           the sound risk management guidelines of the          information. They allow the Company to
                                           Autorité des marchés financiers to which it          comply with the requirements of federal,
                                           is subject, and submits to the recommended           territorial and provincial privacy legislation.
                                           dynamic capital adequacy testing. During this        They also guarantee the personal commitment
                                           exercise, the Company tested a number of             of the Company’s directors, officers,
                                           pessimistic scenarios to measure their effect        employees and representatives to respect
                                           on its capitalization ratio. It confirmed the        the confidentiality of all personal information
                                           latter was adequate in every instance.               communicated to them in the course of their
                                                                                                duties or mandates.
                                           Desjardins Financial Security is also a member
                                           of Assuris, an organization established by           All aspects associated with the protection of
                                           the industry to protect Canadian policyholders       personal information—from the collection of
                                           against the financial failure of their life          personal data; creation of files; the possession,
                                           insurance companies.                                 use and disclosure of such information; rights
                                                                                                to access and correct personal information; to
                                           InDEmnIfIcATIon of                                   the use of nominal lists and privacy breaches—
                                                                                                are covered by the policy and guidelines.
                                           DIREcToRs AnD offIcERs
                                           The Company will indemnify its directors
                                           and officers as well as any person who, at its
                                           request, acted in that capacity for another
mAn AGE mE n T REP oRT




                                           entity in the event a claim or lawsuit is filed
                                           against them. The Company maintains liability
                                           insurance policies for its directors and officers.

                                           coDE of EThIcs AnD
                                           PRofEssIonAL conDUcT
                                           A Code of Ethics and Professional Conduct is
                                           in effect in every Desjardins Group entity and
                                           all managers and employees must abide by
                                           this code.

                                           In keeping with the expectations of regulators,
                                           Desjardins Group has established a mechanism
                                           to help managers and employees report
                                           any accounting, internal control or auditing
                                           irregularities, as well as any unethical
                                           or unprofessional conduct. Through an
                                           independent outside firm, managers and
des ja r di ns fi na nc ial s ec ur it y




                                           employees can anonymously inform the
                                           Group’s Management of any action or conduct
                                           they have witnessed that seems to run counter
                                           the rules of financial reporting, ethics or
                                           professional conduct. Where warranted, an
                                           investigation is carried out and appropriate
                                           action is taken.
                                                                                                                                                        29




REsPonsIBILITy
foR fInAncIAL
REPoRTInG

The consolidated financial statements of Desjardins Financial Security Life Assurance Company (the Company) and the information contained in
this annual report were prepared by the Company’s Management. These consolidated financial statements have been prepared in accordance with




                                                                                                                                                             REs P onsIBILITy foR fI nAnc IAL REP oRT I nG
the Canadian generally accepted accounting principles described in the accompanying notes and contain amounts based on Management’s best
judgment within reasonable limits of materiality.

To discharge its responsibility for the reliability and integrity of the financial data, Management has established systems to ensure strict control over
accounting records, operations, and the various systems used.

The Board of Directors of the Company has approved the information contained in this annual report and exercises its responsibility of overseeing
Management in the preparation of financial statements and maintenance of appropriate internal control systems; it exercises this responsibility
primarily through its Audit Committee, the members of which are neither members of Management nor employees of the Company. The Audit
Committee meets regularly with Management, the Appointed Actuary, and the internal and external auditors. The auditors may, if they deem
necessary, request meetings with the Audit Committee. The Board of Directors, through its Investment Committee and Audit Committee, approves
the investment policies and monitors the activities governed by such policies. The Board of Directors also oversees the Company’s transactions with
related parties and with persons related to directors or officers; it does so through its Ethics Committee, to which all major transactions of this nature
must be submitted for approval.

The Appointed Actuary, named by the Board of Directors, carries out a yearly valuation of the Company’s policyholder liabilities in accordance
with the standards of the Canadian Institute of Actuaries and the requirements of the Act Respecting Insurance (Québec) and reports thereon
to the Company’s policyholders and shareholder. To this end, the Appointed Actuary may ask to meet with the Audit Committee as well as the
Board of Directors. To perform this valuation, the Appointed Actuary makes assumptions as to future interest, mortality and morbidity rates, claims
experience, policy terminations, inflation, reinsurance recoveries, expenses and other contingencies, by taking into consideration the circumstances
of the Company. In his report, the Appointed Actuary defines the scope of the valuation and issues an opinion. Each year, the Appointed Actuary
is required to perform an analysis of the Company’s financial position and prepare a report for the Board of Directors. This analysis tests the
Company’s capital adequacy to December 31, 2011, under adverse economic and business conditions.

The external auditors, Samson Bélair/Deloitte & Touche s.e.n.c.r.l., appointed by the Shareholder, are responsible for auditing the Company’s
consolidated financial statements and have full and unrestricted access to the Audit Committee’s meetings as well as to any other information they
deem necessary in order to support an audit opinion on these financial statements.

The Autorité des marchés financiers is empowered to audit the Company’s compliance with the Act Respecting Insurance (Québec), which aims
primarily to protect policyholder interests and maintain a sound financial position.




                                                                                                                                                             des ja r di ns fi na nc ial s ec ur it y
RichaRd	FoRtieR	                                                               FRançois	dRouin
President and Chief Operating Officer                                          Senior Vice-President
                                                                               Finance

Lévis, January 31, 2008
                                                                 30




                                                                 AUDIToRs’
                                                                 REPoRT
                                                                 To the Policyholders and Shareholder of Desjardins financial security Life Assurance company

                                                                 We have audited the consolidated balance sheet of Desjardins financial security Life Assurance company and the consolidated statement
A UDIT oRs’ REP oRT A nD A PPoIn TED A c T U A Ry ’ s RE Po RT




                                                                 of net assets of its segregated funds as at December 31, 2007, as well as the consolidated statements of income, policyholders’ and shareholder’s
                                                                 equity, cash flows and changes in net assets of segregated funds for the year then ended. These financial statements are the responsibility of the
                                                                 Company’s Management. Our responsibility is to express an opinion on these financial statements based on our audit.

                                                                 We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform
                                                                 an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test
                                                                 basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used
                                                                 and significant estimates made by Management, as well as evaluating the overall financial statement presentation.

                                                                 In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of Desjardins financial security
                                                                 Life Assurance company and of its segregated funds as at December 31, 2007, and the results of its operations, its cash flows and the changes
                                                                 in net assets of its segregated funds for the year then ended in accordance with Canadian generally accepted accounting principles.




                                                                                                                                           	
                                                                 samson	BélaiR/deloitte	&	touche,	s.e.n.c.R.l.
                                                                 Chartered Accountants

                                                                 Québec, January 31, 2008




                                                                 APPoInTED
                                                                 AcTUARy’s REPoRT
                                                                 To the Policyholders, Shareholder and Directors of Desjardins financial security Life Assurance company
des ja r di ns fi na nc ial s ec ur it y




                                                                 I have made valuations of the policy liabilities of Desjardins financial security Life Assurance company for its consolidated balance sheet as
                                                                 at December 31, 2007 and their change in the consolidated statement of income for the year then ended in accordance with accepted actuarial
                                                                 practice, including selection of appropriate valuation assumptions and methods.

                                                                 In my opinion, the amount of the Company’s policy liabilities makes appropriate provision for all policyholder obligations and the consolidated
                                                                 financial statements fairly present the results of the valuation.




                                                                 camil	lévesque
                                                                 Fellow, Canadian Institute of Actuaries

                                                                 Lévis, January 31, 2008
                                                                                                                              31



consoLIDATED sTATEmEnT of IncomE
for the year ended december 31
(in millions of dollars)

                                                                                   notes        2007          2006
  Revenue
  Premium income
    Insurance                                                                                    $ 2,329.7      $   2,065.7
    Annuities                                                                                        245.6            372.7

                                                                                                      2,575.3       2,438.4
  Net investment income                                                                   4d            514.3         674.1
  Other revenue                                                                                         133.1         115.2

                                                                                                      3,222.7       3,227.7

  Expenses
  Expenses attributable to policyholders
    Insurance benefits and annuities                                                                  1,952.9       1,805.7




                                                                                                                                   conso LIDATED fInA ncIAL sTATE mEnTs
    Change in actuarial liabilities                                                       7d            161.8         455.3
    Policyholder dividends and experience rating refunds                                                 86.8          89.9
    Interest on benefits and deposits                                                                    14.2          10.5

                                                                                                      2,215.7       2,361.4
  Commissions                                                                                           190.7         164.5
  Operating expenses                                                                                    473.1         450.5
  Premium taxes                                                                                          54.9          48.5

                                                                                                      2,934.4       3,024.9

  operating income                                                                                     288.3         202.8
  Income taxes                                                                            14            70.7          50.8
  Non-controlling interest in subsidiaries                                                10             0.9           0.7

  net income                                                                                     $	    216.7    $    151.3




ALLocATIon of nET IncomE
  Attributable to participating policyholders                                                    $        5.6   $      5.5
  Attributable to the shareholder                                                                       211.1        145.8

  net income                                                                                     $	    216.7    $    151.3




                                                                                                                                   des ja r di ns fi na nc ial s ec ur it y
The accompanying notes are an integral part of the consolidated financial statements.
                                           32



                                           consoLIDATED BALAncE shEET
                                           as at december 31
                                           (in millions of dollars)

                                                                                                                                                             notes        2007            2006

                                             AssETs
                                             Investments                                                                                                              4
                                               Bonds                                                                                                                       $    8,449.8    $    7,802.8
                                               Mortgage loans and business loans                                                                                                2,924.5         2,089.1
                                               Real estate                                                                                                                        882.7           487.6
                                               Stocks                                                                                                                           1,162.6           545.9
                                               Cash and money market instruments                                                                                                  486.7           906.6
                                               Policy loans                                                                                                                       107.4           108.7
                                               Other loans and investments                                                                                                        835.1           406.2

                                                                                                                                                                               14,848.8        12,346.9
                                             Other assets                                                                                                             6           459.1           457.1

                                                                                                                                                                            15,307.9
                                                                                                                                                                           $	
conso LIDATED fInA ncIAL sTATE mEnTs




                                             Total general fund assets                                                                                                                     $ 12,804.0


                                             net assets of segregated funds                                                                                                $	 2,246.9      $    2,112.1



                                             LIABILITIEs
                                             Policy liabilities
                                              Actuarial liabilities                                                                                                   7    $ 10,207.8      $    8,635.4
                                              Provisions for claims, policyholder dividends and experience rating refunds                                                       259.0             274.2
                                              Policyholder deposits                                                                                                             396.3             351.1

                                                                                                                                                                               10,863.1         9,260.7
                                             Other liabilities                                                                                                       8           3,107.5        1,598.4
                                             Long-term debt                                                                                                          9              85.8           83.2
                                             Deferred net realized gains                                                                                            4b              51.4          650.5
                                             Liabilities for preferred shares                                                                                       12             275.0          275.0
                                             Non-controlling interest in subsidiaries                                                                               10               5.9            4.8

                                                                                                                                                                               14,388.7        11,872.6


                                             PoLIcyhoLDERs’ AnD shAREhoLDER’s EQUITy
                                             Participating policyholders’ equity                                                                                                  207.4          180.1
                                             Shareholder’s equity                                                                                                                 711.8          751.3

                                             Total policyholders’ and shareholder’s equity                                                                                 	      919.2          931.4
des ja r di ns fi na nc ial s ec ur it y




                                             Total general fund liabilities and equity                                                                                      15,307.9
                                                                                                                                                                           $	              $ 12,804.0


                                             net assets attributable to segregated fund policyholders                                                                      $	 2,246.9      $    2,112.1

                                           The accompanying notes are an integral part of the consolidated financial statements.


                                           On behalf of the Board of Directors:




                                           sylvie	st-PieRRe	BaBin		                                                                seRge	hamelin
                                           Chair of the Board of Directors                                                         Chair of the Audit Committee
                                                                                                                                                                                  33



consoLIDATED sTATEmEnT of PoLIcyhoLDERs’
AnD shAREhoLDER’s EQUITy
for the year ended december 31
(in millions of dollars)

                                                                                                                 Accumulatedother
                                                                                   Retainedearnings           comprehensiveincome             Totalequity
                                               Share                                                                                                              
                                              capital     Contributed Participating                    Participating                Participating                 
                                             (Note 12)        surplus policyholders        Shareholder policyholders    Shareholder policyholders   Shareholder


  Balance as at
    january 1, 2006                          $     221.8         $      19.8        $    174.6     $    416.3        $      —     $       —      $    174.6     $     657.9
  Net income for 2006                                                                      5.5          145.8                                           5.5           145.8
  Dividends                                                                                 —           (52.4)                                           —            (52.4)

  Balance as at
    December 31, 2006                              221.8                19.8             180.1          509.7               —             —           180.1           751.3




                                                                                                                                                                                       conso LIDATED fInA ncIAL sTATE mEnTs
  Restatement as at
    January 1, 2007 (Note 3)                            —                  —              11.1               (5.2)        13.9          75.5           25.0            70.3

  Balance as
     at january 1, 2007,
     as restated                                   221.8                19.8             191.2          504.5             13.9          75.5          205.1            821.6
  Issuance of Class A shares                        85.2                                                                                                 —              85.2
  Issuance of Class B shares                       285.1                                                                                                 —             285.1
  Redemption of Class B shares                    (285.1)                                                                                                —            (285.1)
  Dividends                                                                                  —         (245.6)                                           —            (245.6)
  Related party transaction
     adjustments (Note 19)                              —              (19.8)                —         (121.3)              —             —              —            (141.1)

  comprehensive income:
  Net income for 2007                                                                       5.6         211.1                                            5.6          211.1
  Other comprehensive
   income (Note 13)                                                                                                       (3.3)        (19.4)           (3.3)          (19.4)

  comprehensive income
   for the year                                                                                                                                         2.3	    	     191.7

  Balance as
   at December 31, 2007                      $	 307.0	           $	        —	       $	 196.8	      $	 348.7	         $	   10.6	   $	    56.1	    $	 207.4	      $	 711.8

The accompanying notes are an integral part of the consolidated financial statements.




                                                                                                                                                                                       des ja r di ns fi na nc ial s ec ur it y
                                           34



                                           consoLIDATED sTATEmEnT of cAsh fLows
                                           for the year ended december 31
                                           (in millions of dollars)

                                                                                                                                                      2007             2006

                                             oPERATInG AcTIVITIEs
                                             Net income                                                                                                $      216.7     $     151.3
                                             Items not affecting cash
                                                Change in actuarial liabilities                                                                               161.8            455.3
                                                Gains, losses and amortization recognized in investment income                                                (11.0)          (212.2)
                                                Future income taxes                                                                                            19.2              (1.1)
                                                Other                                                                                                          16.8               5.0

                                                                                                                                                              403.5           398.3
                                             Change in operating assets and liabilities
                                              Trading assets and liabilities                                                                                (1,068.9)              —
                                              Net change in commitments under securities lending transactions,
                                              repurchase agreements and securities sold short                                                               1,464.2           290.4
conso LIDATED fInA ncIAL sTATE mEnTs




                                              Other                                                                                                             1.0            57.8

                                             cash flows from operating activities                                                                             799.8           746.5


                                             InVEsTInG AcTIVITIEs
                                             Sales, maturities and repayments
                                               Stocks and bonds (available for sale in 2007)                                                                  896.8         4,172.4
                                               Real estate                                                                                                     60.4            23.0
                                             Purchases and issuances
                                               Stocks and bonds (available for sale in 2007)                                                                 (640.8)        (4,209.9)
                                               Real estate                                                                                                   (124.7)            (90.0)
                                             Net change in money market instruments of more than three months                                                 148.4           (145.6)
                                             Net change in mortgage loans, policy loans and business loans                                                   (489.3)          (193.0)
                                             Net change in other loans and investments                                                                       (402.9)          (406.2)
                                             Business acquisitions and cash acquired                                                                         (215.5)             (2.3)
                                             Business dispositions net of cash ceded                                                                           16.9                —
                                             Other                                                                                                             (4.8)             (6.3)

                                              cash flows from investing activities                                                                           (755.5)          (857.9)


                                             fInAncInG AcTIVITIEs
                                             Issuance of Class A shares                                                                                        85.2                 —
                                             Issuance of Class B Shares                                                                                       285.1                 —
                                             Redemption of Class B shares                                                                                    (285.1)                —
                                             Dividends paid                                                                                                  (226.0)            (53.0)
                                             Loan from the parent company                                                                                     (85.0)             85.0
                                             Increase in long-term debt                                                                                        36.4              25.9
                                             Decrease in long-term debt                                                                                      (126.7)          (199.0)
des ja r di ns fi na nc ial s ec ur it y




                                             Other                                                                                                              0.3               (2.9)

                                             cash flows from financing activities                                                                            (315.8)          (144.0)

                                             Decrease in cash and cash equivalents                                                                           (271.5)          (255.4)
                                             Cash and cash equivalents – beginning of year                                                                    557.2            812.6

                                             cash and cash equivalents – end of year                                                                   $	     285.7     $     557.2

                                             Additional information
                                              Interest paid                                                                                            $       24.9     $       11.2
                                              Income taxes paid net of recoveries                                                                      $       86.0     $       23.4

                                             Cash and cash equivalents include $24.3M ($9.4M in 2006) in cash and $261.4M ($547.8M in 2006) in money market instruments maturing in
                                             less than three months.

                                           The accompanying notes are an integral part of the consolidated financial statements.
                                                                                                                                35



consoLIDATED sTATEmEnT of nET AssETs
of sEGREGATED fUnDs
as at december 31
(in millions of dollars)

                                                                                   note        2007           2006
  Investments
    Bonds                                                                                        $      93.1    $     107.6
    Mortgage loans                                                                                      24.1            30.3
    Stocks and mutual fund units                                                                     1,987.1        1,842.6
    Money market instruments                                                                           134.0          125.1
  Other assets                                                                                          91.5            61.4
  Liabilities                                                                                          (82.9)          (54.9)

  nET AssETs of sEGREGATED fUnDs                                                            2    $	 2,246.9     $   2,112.1




                                                                                                                                     conso LIDATED fInA ncIAL sTATE mEnTs
consoLIDATED sTATEmEnT of chAnGEs In nET AssETs
of sEGREGATED fUnDs
for the year ended december 31
(in millions of dollars)

                                                                                   notes       2007           2006

  nET AssETs of sEGREGATED fUnDs – BEGInnInG of yEAR                                             $	 2,112.1     $   5,292.3
  Restatement as at January 1, 2007                                                         3           (0.8)            —

  Balance as at january 1, 2007, as restated                                                         2,111.3        5,292.3

  Additions
   Amounts received from policyholders                                                                 448.1          458.8
   Net investment income                                                                                75.8          168.5
   Net realized and unrealized gains on investments                                                       —           604.3

                                                                                                      523.9         1,231.6

  Deductions
   Withdrawals and redemptions                                                                         319.1          408.6
   Transfer of a fund                                                                    17b              —         3,972.6
   Net realized and unrealized losses on investments                                                    36.7             —
   Management fees                                                                                      32.5           30.6

                                                                                                      388.3         4,411.8




                                                                                                                                     des ja r di ns fi na nc ial s ec ur it y
  nET AssETs of sEGREGATED fUnDs – EnD of yEAR                                                   $	 2,246.9     $   2,112.1

The accompanying notes are an integral part of the consolidated financial statements.
                                           36




                                           noTEs To ThE consoLIDATED
                                           fInAncIAL sTATEmEnTs
                                           for the year ended december 31, 2007
                                           (all tabular amounts are in millions of dollars)




                                            note 1

                                           mEThoD of IncoRPoRATIon AnD nATURE of oPERATIons
                                           a) method of Incorporation                                                        b) nature of operations

                                           Desjardins Financial Security Life Assurance Company (the Company)                The Company designs, markets and distributes various individual
                                           is incorporated under the Act Respecting Insurance (Québec) and is                and group insurance and savings products. The Company is under
conso LIDATED fInA ncIAL sTATE mEnTs




                                           governed by Part 1A of the Companies Act (Québec).                                the ultimate control of the Caisses Desjardins, through the Fédération
                                                                                                                             des caisses Desjardins du Québec. It is the life and health insurance
                                                                                                                             subsidiary of Desjardins Group.



                                            note 2

                                           sIGnIfIcAnT AccoUnTInG PoLIcIEs
                                           These consolidated financial statements were prepared in accordance               – Assets classified as available for sale are measured at fair value
                                           with Canadian generally accepted accounting principles. These principles            except for those that do not have a quoted market price in an active
                                           conform, in all material respects, with the requirements of the Autorité            market, which are measured at cost. The change in fair value of an
                                           des marchés financiers (AMF).                                                       asset is recognized in other comprehensive income until the asset
                                                                                                                               is derecognized.
                                           The preparation of these financial statements required Management                 – Loans and receivables, which include mortgage loans, business
                                           to make estimates and assumptions that affect the reported amounts                  loans, policy loans, reverse purchase agreements, immigrant investor
                                           of assets and liabilities, estimates that primarily concern policy liabilities,     loans, premiums receivable and accrued net investment income are
                                           the determination of fair value of financial instruments, the disclosure            measured at amortized cost using the effective interest method.
                                           of commitments and contingencies, and the reported amounts of
                                           revenue and expenses during the reporting period. Actual results could            With regard to stocks classified as “assets available for sale,” a
                                           differ from those estimates.                                                      significant or prolonged decline in the fair value of a stock below its cost
                                                                                                                             is objective evidence of impairment. In this situation, the accumulated
                                           The significant accounting policies used in preparing these financial             loss, which is the difference between the acquisition cost and the
                                           statements are described hereafter. Accounting policies amended during            current fair value, less any depreciation of this financial asset previously
                                           the period are described in Note 3.                                               recorded in net income, is recognized in net income.

                                                                                                                             With regard to bonds classified as “assets available for sale,” the interest
                                           consoLIDATIon                                                                     calculated according to the effective interest method is recognized in
des ja r di ns fi na nc ial s ec ur it y




                                           These consolidated financial statements include the operating results             net income, and an expense is recorded in net income if a permanent
                                           and financial position of the Company and its subsidiaries as well as             loss in the security value represents a credit risk with regard to the
                                           its share in joint ventures.                                                      amounts due by the issuer.

                                                                                                                             Financial liabilities are measured at amortized cost according to the
                                           fInAncIAL InsTRUmEnTs                                                             effective interest method and include all liabilities not held for trading.
                                                                                                                             The change in fair value of liabilities held for trading, that is, derivative
                                           Financial instruments are initially measured at their fair value. Their           financial instruments and securities sold short, is recorded in net income.
                                           subsequent measurement varies depending on their classification.
                                                                                                                             The main financial asset classes designated as held for trading under
                                           Financial assets are classified according to the Company’s intention              the fair value option are:
                                           and capacity to hold invested assets and are recognized using the
                                                                                                                             i) Financial assets matched to actuarial liabilities that would otherwise
                                           following methods:
                                                                                                                                be classified as available for sale, in order to substantially reduce
                                           – Assets held for trading and those designated under the fair value                  the accounting disparity that would result from this classification.
                                             option as being held for trading are measured at fair value, and                   The impact of fluctuations in the fair value of these investments is
                                             the change in fair value is recorded in net income.                                largely offset by corresponding changes in actuarial liabilities;
                                                                                                                             ii) Financial assets that have hedge funds as their underlying asset and
                                                                                                                                 are managed based on a documented investment strategy aimed at
                                                                                                                                 taking advantage of the market’s short-term volatility.
                                                                                                                                                     37


The transaction costs for securities held for trading are charged to          Gains and losses realized on real estate are deferred and recorded
income as incurred. The transaction costs for securities classified as        in net income at the rate of 3% per quarter using the declining
available for sale or as loans and receivables are capitalized and then       balance method.
amortized over the expected life of the instrument using the effective
interest method.
                                                                              d) stocks
The regular-way purchase or sale of financial assets is measured using
                                                                              Stocks are recorded at fair value. This value is based on market
the trade date method.
                                                                              prices, when available. In the absence of these prices, the fair value is
                                                                              calculated using the market prices of similar shares. Stocks classified
                                                                              as available for sale that do not have a quoted market price in an active
InVEsTmEnTs                                                                   market are measured at cost. The dividends related to a stock available
                                                                              for sale are recorded in net income as soon as the Company’s right to
a) Bonds                                                                      receive payment has been determined.

Bonds are recorded at fair value on the balance sheet.
                                                                              e) cash and money market Instruments
The fair value of bonds is the prevailing market price, when available.
In the absence of an active market, the Company establishes this fair         Cash and money market instruments include deposit accounts in
value by using valuation techniques. These techniques include using           financial institutions and all investments in money market instruments
information available on recent arm’s length market transactions              and are recorded at fair value.




                                                                                                                                                          conso LIDATED fInA ncIAL sTATE mEnTs
between knowledgeable willing parties, the current fair value of
another relatively identical financial instrument and discounted cash
                                                                              f) Policy Loans
flow analysis.
                                                                              Policy loans are carried at their unpaid balance and are fully secured by
                                                                              the cash surrender value of the policies on which the loans are made.
b) mortgage Loans and Business Loans

Mortgage loans and business loans are recorded at amortized cost,
                                                                              g) other Loans and Investments
less provisions for non-performing loans. Premiums or discounts on
acquisition are amortized using the effective interest method.                Other loans and investments include immigrant investor loans classified
                                                                              as loans and receivables, as well as reverse repurchase agreements and
The fair value of these loans disclosed in Note 4 is estimated using a        derivative financial instruments of an investment nature. The accounting
discounted cash flow calculation method that uses market interest rates       policies that apply to these items are described below.
currently charged for similar new loans as at December 31, applied to
expected maturity amounts.
                                                                              h) Reverse Repurchase Agreements and
The Company follows a policy of recognizing these loans as impaired              Repurchase Agreements
when, in its opinion, there is reasonable doubt concerning the
collectibility of a portion of the principal or interest, or where interest   Reverse repurchase agreements are short-term investment transactions.
on a loan is contractually past due for 90 days or more unless, in the        They represent the amounts the Company will receive when the
Company’s opinion, there is no doubt concerning the collectibility of         securities it purchased are resold to the original counterparties at a
the principal and interest, and recovery procedures have commenced.           predetermined date and price. These items are classified as other loans
All investments are classified as non-performing when payment is              and receivables. Interest income from these transactions is recorded
180 days in arrears. With regard to these loans, the provision for non-       on an accrual basis.
performing investments is based on the present value of the estimated
future cash flows, discounted at the effective interest rate of the loan      Repurchase agreements are short-term funding transactions whereby
and on the current market price of the loan. The interest recorded after      the Company sells securities it owns and simultaneously agrees to
the initial 90-day period is reversed and specific provisions are set up,     buy back the same securities at a predetermined date and price.
if necessary, for the previously recorded accrued interest and to cover       The obligation to repurchase these securities is accounted for based on
the risk of capital losses.                                                   the amount payable under other liabilities. The interest expense related




                                                                                                                                                          des ja r di ns fi na nc ial s ec ur it y
                                                                              to these transactions is recorded on an accrual basis.

c) Real Estate                                                                Reverse repurchase agreement and repurchase agreement transactions
                                                                              are offset and the net balance is recorded on the balance sheet when
Real estate held by the Company for investment purposes, including            the Company has a legally enforceable right to offset the recorded
buildings occupied by the Company, is carried at cost, increased              amounts and intends either to settle on a net basis or to realize
quarterly by 3% of the difference between the carrying value and              the asset and settle the liability simultaneously.
the estimated market value based on appraisals performed by an
outside appraiser on a three-year cycle basis.
                                                                              i)   Derivative financial Instruments
Real estate also includes foreclosed assets held for sale, which are
recorded at their estimated fair values, less the selling costs. Any          Derivative instruments are initially measured at fair value. Gains and
difference between the carrying value of the loan before foreclosure          losses are recorded in net income unless the derivative instruments are
and the amount at which the foreclosed real estate assets were initially      part of a qualifying cash flow hedge relationship.
measured is recorded as a gain or loss in net income.
                                                                              Derivative instruments with a positive fair value are recorded on the
Any other than temporary declines in the value of the entire real estate      balance sheet as other loans and investments, whereas those that have
portfolio are recognized in net income when identified.                       a negative value are recorded as other liabilities. The itemized amounts
                                                                              are presented in Note 5 to the financial statements.
                                           38



                                            note 2 (continued)

                                           sIGnIfIcAnT AccoUnTInG PoLIcIEs (conTInUED)
                                           i)   Derivative financial Instruments (continued)                            testing a range of scenarios prescribed by Canadian standards of
                                                                                                                        practice. The provision for minimum guarantees on segregated fund
                                           The fair value of derivative financial instruments is calculated using       products is done using stochastic modeling.
                                           pricing models that incorporate the current market prices and the
                                           contractual prices of the underlying instruments, the time value of          The period used for the projection of cash flows is the policy lifetime
                                           money and the yield curves. The fair value of derivative financial           for most insurance contracts. For certain types of contracts, a shorter
                                           instruments is recorded without taking into account the impact               projection period may be used, limiting the period to the term of the
                                           of master netting agreements.                                                liability over which the Company is exposed to material risk without
                                                                                                                        the ability to adjust policy premiums or fees.
                                           cAsh fLow hEDGInG
                                           The effective portion of the changes in the fair value of derivative         sEcURITIEs LEnDInG TRAnsAcTIons
                                           financial instruments designated as hedges and qualifying for cash           The Company lends securities it owns to third parties and receives
                                           flow hedging is recorded in other comprehensive income. The gain             securities or cash amounts as collateral. A liability is recorded
                                           or loss related to the ineffective portion is immediately recognized in      for cash collateral received from borrowers through securities
                                           net income. Accumulated other comprehensive income is reclassified
conso LIDATED fInA ncIAL sTATE mEnTs




                                                                                                                        lending transactions.
                                           in net income over the period during which the hedged item affects
                                           net income.
                                                                                                                        sEcURITIEs soLD shoRT
                                           fAIR VALUE hEDGInG                                                           Securities sold short represent the Company’s obligation to deliver
                                                                                                                        securities it did not own at the time of sale. They are accounted for as
                                           The changes in the fair value of derivative financial instruments            liabilities held for trading and recorded at fair value in other liabilities.
                                           designated as hedges and qualifying for fair value hedging and
                                           the changes in the fair value of the hedged assets and liabilities
                                           are recorded in net income.                                                  LIABILITIEs foR PREfERRED shAREs
                                                                                                                        As the preferred shares issued by the Company give the shareholder
                                           cAPITAL AssETs                                                               the right to redeem the shares at a specific date, they are classified
                                                                                                                        as financial liabilities rather than as shareholder’s equity and are carried
                                           Capital assets, which include leasehold improvements, computer               at cost. Dividend payments are recorded as an interest expense in
                                           software, furniture and equipment, are carried at cost and amortized         net income.
                                           on a straight-line basis at annual rates, varying from 10% to 50%,
                                           sufficient to write off the assets over their estimated useful lives.
                                           Impairment in value is recognized when the carrying value is not             AccUmULATED oThER comPREhEnsIVE IncomE
                                           recoverable and exceeds the fair value of the asset.
                                                                                                                        Accumulated other comprehensive income is recorded in policyholders’
                                                                                                                        and shareholder’s equity, net of taxes, and comprises unrealized gains
                                           InTAnGIBLE AssETs                                                            and losses on investments available for sale and, if applicable, gains and
                                                                                                                        losses on derivative financial instruments designated as hedges in an
                                           Intangible assets are amortized on a straight-line basis over a period       effective cash flow hedge.
                                           of 20 to 40 years. They are tested for recoverability when events or
                                           changes in circumstances indicate that their carrying value may not
                                           be recoverable. If the carrying value exceeded their fair value, an          TRAnsLATIon of AccoUnTs DEnomInATED
                                           impairment loss would be recorded.
                                                                                                                        In foREIGn cURREncIEs
des ja r di ns fi na nc ial s ec ur it y




                                                                                                                        The Company uses the temporal method to translate its accounts
                                           AcTUARIAL LIABILITIEs                                                        denominated in foreign currencies into Canadian dollars.
                                           Actuarial liabilities represent the amounts which, together with
                                                                                                                        Monetary assets and liabilities, as well as those measured at fair value
                                           estimated future premiums and net investment income, will provide
                                                                                                                        on the balance sheet, are translated at the exchange rate in effect at the
                                           for all Company commitments regarding estimated future benefits,
                                                                                                                        balance sheet date. Other assets and liabilities are translated at historical
                                           policyholder dividends, dues and taxes (other than income taxes) and
                                                                                                                        exchange rates. Account balances appearing in the Statement of Income
                                           related estimated future expenses. Each year, the Appointed Actuary is
                                                                                                                        are translated at the exchange rate prevailing on the transaction dates.
                                           required to assess the actuarial liabilities the Company will need to meet
                                                                                                                        Gains and losses, whether realized or not, arising from these translations
                                           future obligations. Actuarial liabilities are determined using Canadian
                                                                                                                        are recorded in net income, except for the unrealized gains and losses
                                           accepted actuarial practices under the Canadian asset liability method.
                                                                                                                        on derivative financial instruments classified as available for sale and
                                                                                                                        the gains and losses on derivatives designated as cash flow hedges,
                                           Under the Canadian asset liability method, determining of actuarial
                                                                                                                        which are recognized in other comprehensive income.
                                           liabilities is based on an explicit projection of cash flows using current
                                           best estimate assumptions for each material cash flow item and
                                           contingency. Investment returns are based on projected investment
                                                                                                                        REVEnUE REcoGnITIon
                                           income using the current asset portfolios and projected reinvestment
                                           strategies. Each non-economic assumption is adjusted by a margin for         Insurance and annuity premiums are generally recognized as revenue
                                           adverse deviation. With respect to investment returns, the margin for        when due. As soon as these premiums are recognized, actuarial liabilities
                                           adverse deviation is established by yield rate scenario testing. Scenario    are computed to ensure the matching of revenue and expenses.
                                           testing is generally performed on a deterministic basis that includes
                                                                                                                                                            39


Other revenue is recognized as services are rendered and mainly                    sEGREGATED fUnDs
comprises fees for segregated fund asset management, group contract
administrative services, assistance services, as well as commissions               Certain contracts allow their policyholders to invest in segregated
on mutual fund sales. Other revenue also includes reinsurance                      funds held by the Company for their benefit. The underlying assets
agreement fees.                                                                    are registered in the name of the Company. Substantially all risks and
                                                                                   rewards of ownership accrue to policyholders. Consequently, assets held
                                                                                   in segregated fund accounts are excluded from the Company’s general
REInsURAncE                                                                        fund assets. The Consolidated Statements of Net Assets of Segregated
                                                                                   Funds and Changes in Net Assets of Segregated Funds are presented for
The Company’s premium income, payments to policyholders, actuarial                 information purposes. Segregated fund assets are recorded at fair value
liabilities and change in actuarial liabilities relating to reinsured activities   at year-end.
are recorded net of amounts ceded to reinsurers.
                                                                                   The Company’s variable annuity contracts offered through segregated
                                                                                   funds have minimal death benefits and maturity value guarantees.
IncomE TAxEs                                                                       The liabilities associated with these minimal guarantees are recorded
The Company uses the liability method to calculate its income                      as actuarial liabilities in the Company’s general fund.
taxes. Under this method, future income tax assets and liabilities are
determined for each temporary difference between the carrying value
and the tax value of the assets and liabilities and are estimated based
                                                                                   fUTURE AccoUnTInG chAnGEs
on the tax rate that should be in effect on the date these assets and              In December 2006, the CICA issued new accounting standards




                                                                                                                                                                   conso LIDATED fInA ncIAL sTATE mEnTs
liabilities are expected to be realized or settled. Future income tax assets       entitled “Capital Disclosures” (Section 1535), “Financial Instruments
are recognized to the extent they are more likely than not to be realized.         – Disclosures” (Section 3862) and “Financial Instruments – Presentation”
                                                                                   (Section 3863), which apply to the Company effective January 1, 2008.
                                                                                   Under Section 1535, entities are required to disclose information that
EmPLoyEE fUTURE BEnEfITs                                                           enables users of financial statements to evaluate the entity’s objectives,
The employees of the Company belong to the Desjardins Group                        policies and capital management procedures. Section 3861 “Financial
Pension Plan, a multiemployer defined benefit plan. The Company also               Instruments – Disclosure and Presentation” will be replaced by Sections
provides life, health and dental insurance benefits to its employees and           3862 and 3863. The purpose of Sections 3862 and 3863 is to provide
retirees through the Desjardins Group multiemployer group insurance                users with information that helps them to clearly understand and
plan. To that end, the Company applies the recommendations of the                  evaluate the significance of financial instruments for the entity’s financial
Canadian Institute of Chartered Accountants (CICA) regarding defined               position and performance and also to better evaluate the nature and
contribution plans, since the information on the costs and funding                 extent of the risks associated with the financial instruments and the
of the plan is not determined separately for the member companies                  manner in which they are managed. These new standards, which
of the Group. The cost of these benefits is charged to income as                   apply specifically to disclosure, will therefore have no impact on the
the Company makes contribution payments.                                           Company’s income.



GoVERnmEnT AssIsTAncE
Government assistance is recorded as a reduction to the related
expenses or cost of assets.



 note 3

REsTATEmEnTs
On January 1, 2007, the Company adopted the new sections in the                    The adoption of these new standards has not significantly changed




                                                                                                                                                                   des ja r di ns fi na nc ial s ec ur it y
CICA Handbook regarding financial instruments entitled “Financial                  the Company’s risk management policies or hedging activities.
Instruments – Recognition and Measurement” (Section 3855), “Hedges”                In compliance with CICA guidelines, these new standards have been
(Section 3865) and “Comprehensive Income” (Section 1530). These                    applied retroactively without restatement of the comparative figures.
standards provide guidance on the recognition and measurement of                   These adjustments on the opening balance as at January 1, 2007 are
financial assets and liabilities and non-financial derivatives, as well as         presented in the following table.
for the classification of financial instruments and guidelines for hedge
accounting. The Company also complies with the section entitled “Life
Insurance Enterprises – Specific Items” (Section 4211), which stipulates
that insurance companies must account for any financial instruments
that are within the scope of new Section 3855 in the same way as other
entities. Details of the new accounting policies are presented in Note 2
to the financial statements.
                                           40



                                            note 3 (continued)

                                           REsTATEmEnTs (conTInUED)
                                                                                                                                           Balanceasat   Adjustments                   
                                                                                                                                           December31, asatJanuary1,        Adjusted
                                                                                                                                                   2006           2007          balance
                                             Assets
                                             Bonds                                                                                               $   7,802.8       $     460.2      $    8,263.0
                                             Mortgage loans and business loans                                                                       2,089.1             344.2           2,433.3
                                             Real estate                                                                                               487.6                —              487.6
                                             Stocks                                                                                                    545.9              50.5             596.4
                                             Cash and money market instruments                                                                         906.6                —              906.6
                                             Policy loans                                                                                              108.7                —              108.7
                                             Other loans and investments                                                                               406.2              38.8             445.0
                                             Other assets                                                                                              457.1             (19.7)            437.4

                                             	 	 	 	 	                                                                                            12,804.0	
                                                                                                                                                 $	                $	    874.0	      13,678.0
                                                                                                                                                                                    $	

                                             Liabilities
conso LIDATED fInA ncIAL sTATE mEnTs




                                             Actuarial liabilities                                                                                   9,260.7            1,418.1         10,678.8
                                             Other liabilities                                                                                       1,598.4              (10.1)         1,588.3
                                             Long-term debt                                                                                             83.2                 —              83.2
                                             Deferred net realized gains                                                                               650.5             (629.3)            21.2
                                             Liabilities for preferred shares                                                                          275.0                 —             275.0
                                             Non-controlling interest in subsidiaries                                                                    4.8                 —               4.8
                                             Participating policyholders’ equity                                                                       180.1               25.0            205.1
                                             Shareholder’s equity                                                                                      751.3               70.3            821.6

                                             	 	 	 	 	                                                                                            12,804.0	
                                                                                                                                                 $	                $	    874.0	      13,678.0
                                                                                                                                                                                    $	


                                           The adjustments as at January 1, 2007 include, in addition to the effect of measuring certain investments at fair value, the write-off of the net
                                           deferred realized gains on financial instruments, the impact of these adjustments on actuarial liabilities and future income taxes, as well as certain
                                           reclassifications associated with the treatment of various financial instruments.

                                           The adjustments as at January 1, 2007 also reflect a correction in the accounting of premiums paid through policy dividends, which had the effect
                                           of increasing policyholders’ equity by $9.9M and reducing shareholder’s equity by the same amount. This correction has no significant impact on
                                           the previous year’s results.

                                           The application of these new financial instruments standards to the Company’s segregated funds has resulted in a total net asset restatement
                                           of $0.8M as at January 1, 2007.

                                           The main financial instruments accounting policies that were in effect until December 31, 2006 and that were amended are as follows:
                                           – Bonds: were recognized at the cost amortized for the premium or discount, and the realized gains (losses) were deferred over the remaining life.
                                           – Stocks: were recognized at cost, adjusted annually by 15% of the difference between the fair value and the carrying value. Deferred realized gains
                                             (losses) were amortized using the declining balance method.
des ja r di ns fi na nc ial s ec ur it y
                                                                                                                                                               41



 note 4

InVEsTmEnTs
a) Investment Values

                                             Designated                                   
                              heldfor           asheld       Available        loansand                             Total                     
 2007                              trading       fortrading        forsale       receivables        other      balancesheet         Fairvalue
   Government                  $   1,097.6     $     4,434.5      $     923.5      $           —      $       —         $   6,455.6       $    6,455.6
   Corporate                         232.4           1,588.7            173.1                  —              —             1,994.2            1,994.2

 	 	 	 	 	                     	   1,330.0	    	     6,023.2	     	   1,096.6	     	           —	     	       —	        	   8,449.8	      	   8,449.8

 Mortgage loans and
  business loans
  Residential                           —                  —                —            2,119.3              —             2,119.3            2,167.7
  Commercial                            —                  —                —              805.2              —               805.2              824.4

 	 	 	 	 	                     	        —	     	           —	     	         —	     	     2,924.5	     	       —	        	   2,924.5	      	   2,992.1




                                                                                                                                                                    conso LIDATED fInA ncIAL sTATE mEnTs
 Real estate                            —                  —               —                   —           882.7              882.7            1,122.2
 Stocks                                 —               894.7           267.9                  —              —             1,162.6            1,162.7
 Cash and money
   market instruments                 33.4              204.5           248.8                 —               —               486.7              486.7
 Policy loans                           —                  —               —               107.4              —               107.4              107.4
 Other loans and investments
   Reverse repurchase
   agreements                           —                  —                —              565.4              —               565.4              560.0
   Derivative financial
     instruments                      26.1                 —                —                 —               —                26.1               26.1
   Immigrant investor loans             —                  —                —              243.6              —               243.6              252.5

 	 	 	 	 	                     $	 1,389.5	     $	 7,122.4	        $	 1,613.3	      $	 3,840.9	        $	   882.7	        14,848.8	
                                                                                                                        $	                 15,159.5
                                                                                                                                          $	

 Fair value	                   $	 1,389.5	     $	 7,122.4	        $	 1,613.4	      $	 3,912.0	        $	 1,122.2	       	             	    15,159.5
                                                                                                                                          $	




                                                                                                                      Carrying               Fair
 2006                                                                                                                        value             value
 Bonds
   Government                                                                                                           $   5,726.3       $    6,516.1
   Corporate                                                                                                                2,076.5            2,150.8

                                                                                                                            7,802.8            8,666.9




                                                                                                                                                                    des ja r di ns fi na nc ial s ec ur it y
 Mortgage loans
  Residential                                                                                                               1,672.5            1,737.0
  Commercial                                                                                                                  416.6              427.4

                                                                                                                            2,089.1            2,164.4

 Real estate                                                                                                                  487.6              569.5
 Stocks                                                                                                                       545.9              601.3
 Cash and money market instruments                                                                                            906.6              908.7
 Policy loans                                                                                                                 108.7              108.7
 Other loans and investments
   Reverse repurchase agreements                                                                                              359.4              359.4
   Immigrant investor loans                                                                                                    46.8               47.7

                                                                                                                        $ 12,346.9        $ 13,426.6
                                           42



                                            note 4 (continued)

                                           InVEsTmEnTs (conTInUED)
                                           a) Investment Values (continued)

                                           The bond portfolio includes 95.2% (94.2% in 2006) in government bonds and bonds rated A or higher:

                                                                                                                                                               2007           2006
                                            Government                                                                                                    $    6,455.6    $   5,726.3
                                            AAA                                                                                                                  831.7          656.4
                                            AA                                                                                                                   402.5          502.0
                                            A                                                                                                                    355.0          464.4
                                            BBB                                                                                                                  367.5          343.8
                                            BB and lower                                                                                                          37.5          109.9

                                                                                                                                                          $	 8,449.8      $   7,802.8


                                           The carrying value of bonds based on contractual maturity is as follows:
conso LIDATED fInA ncIAL sTATE mEnTs




                                                                                                                                                               2007           2006
                                            Due     in one year or less                                                                                   $      349.7    $     581.1
                                            Due     in years two through five                                                                                  2,789.4        1,669.7
                                            Due     in years six through ten                                                                                   1,383.8        1,585.4
                                            Due     after ten years                                                                                            3,926.9        3,966.6

                                            Total                                                                                                         $	 8,449.8      $   7,802.8


                                           The weighted average effective interest rate is 4.7% (4.5% in 2006) on bonds and 5.4% (5.5% in 2006) on mortgage loans and business loans.


                                           b) Deferred net Realized Gains

                                                                                                                                                               2007           2006
                                            Bonds                                                                                                         $        —      $     570.9
                                            Mortgage loans                                                                                                         —              3.5
                                            Real estate                                                                                                          51.4            21.2
                                            Stocks                                                                                                                 —             54.9

                                                	 	 	 	                                                                                   	          	    $	     51.4     $     650.5


                                           Changes in deferred net realized gains are as follows:

                                                                                                                                                               2007           2006
des ja r di ns fi na nc ial s ec ur it y




                                            Deferred net realized gains – beginning of year                                                               $	    650.5     $     620.2
                                            Restatement following adoption of new accounting standards
                                              as at January 1, 2007 (Note 3)                                                                                    (629.3)            —
                                            Net gains on investments realized during the year
                                              Bonds                                                                                                                —             91.3
                                              Real estate                                                                                                        34.7             0.1
                                              Stocks                                                                                                               —             18.0
                                            Amortization of deferred net realized gains                                                                          (4.5)          (79.1)

                                            Deferred net realized gains – end of year                                                                     $	     51.4     $     650.5
                                                                                                                                                                                               43


c) credit Risk

The Company has set up a provision for non-performing investments of $4.7M ($8.4M in 2006) to account for the credit risk arising from these
investments. As at December 31, 2007, non-performing investments totalled $172.8M ($14.2M in 2006).


non-BAnK-sPonsoRED AssET-BAcKED commERcIAL PAPER
As a result of the turmoil seen in financial markets worldwide, in particular the deterioration of the global credit market, certain Company
investments in asset-backed commercial paper (ABCP) from Canadian non-bank conduits are considered impaired until their anticipated restructuring,
which is expected to occur in 2008. Last August, several investors and financial institutions entered into an agreement designed to deal with the
effects of the liquidity crunch in the non-bank-sponsored ABCP market and to restore a climate of trust. The agreement led to the creation of the
Pan Canadian Investors Committee for Third Party Structured Asset-Backed Commercial Paper. The committee was mandated to propose a fair and
equitable restructuring plan applicable to all investors that would allow for the conversion of ABCP securities into long-term floating rate notes.

On December 23, 2007, the committee announced that an agreement-in-principle had been reached for a global restructuring of ABCP and
that, subject to a certain number of conditions (including various consents and approvals), implementation of the agreement was expected to be
completed in March 2008.

Because an active Canadian non-bank conduit ABCP market did not exist, the Company’s management estimated the fair value of these securities
using a valuation technique based on a financial model that reflects uncertainties regarding returns, underlying asset credit risk, cash inflows and




                                                                                                                                                                                                    conso LIDATED fInA ncIAL sTATE mEnTs
maturities. The financial model reflects the particularities of the restructuring plans announced to date. It also takes available market information
and realistic assumptions into account to arrive at a fair value that reflects market conditions as at December 31.

The methodology used by the Company factors in the restructuring plan’s probability of success (conversion of ABCP securities into term notes),
as well as the probability of non-bank conduit underlying asset liquidation scenarios.

As at December 31, 2007, the Company had ABCP holdings in the amount of $161.2M after recognizing an impairment of $34.2M. Of this
amount, $20.4M is due to an other-than-temporary decline in the value of securities available for sale. The fair value that was determined using
the above-mentioned valuation method may not be an indication of the ultimate net realizable value or future market value. Although Management
believes that the valuation technique is appropriate under the circumstances, changes in the significant assumptions, such as those used to
determine scenario probabilities, underlying asset credit risk and the quality of the assets held as collateral by non-bank conduits, could significantly
alter the value attributed to ABCP securities in the coming quarters.


d) net Investment Income

                                                                                                                                                                   2007              2006
                                                                                        heldfor              Available
                                                                                         trading(1)            forsale                 other                  Total        Total
  Bonds
    Interest                                                                             $       310.6          $         45.8         $            —         $       356.4      $   403.7
    Gains (losses)                                                                              (129.5)                    2.3                      —                (127.2)          65.1
  Stocks
    Dividends                                                                                      5.2                     7.5                    —                    12.7             6.5
    Gains (losses)                                                                                14.7                    (5.5)                   —                     9.2            43.9
  Mortgage loans and business loans                                                                 —                       —                  146.0                  146.0          107.8
  Real estate(2)                                                                                    —                       —                   69.4                   69.4            40.5
  Cash and money market instruments                                                               14.7                     5.1                    —                    19.8            20.6




                                                                                                                                                                                                    des ja r di ns fi na nc ial s ec ur it y
  Policy loans                                                                                      —                       —                    8.1                    8.1             7.9
  Other loans and investments                                                                     58.3                      —                   (9.8)                  48.5             7.0
  Investment management fees                                                                        —                       —                  (28.6)                 (28.6)          (28.9)

  Total net investment income                                                            $	     274.0	          $	       55.2	         $	     185.1	          $	     514.3	      $   674.1




                                                                                                                                                                   2007              2006
  Investment income                                                                                                                                           $       583.7      $   644.8
  Gains (losses) on investments matched to actuarial liabilities                                                                                                      (69.4)          29.3

  Total net investment income                                                                                                                                 $	     514.3       $   674.1

(1) Includes realized and unrealized gains and losses on assets held for trading ($9.5M) and realized gains and losses ($103.9M) on assets designated as held for trading.
(2) Income from real estate is presented net of operating costs of $125.4M ($51.1M in 2006).
                                           44



                                            note 4 (continued)

                                           InVEsTmEnTs (conTInUED)
                                           e) securities Lending

                                           As at December 31, 2007, the Company had lent securities with a market value of $979.3M ($744.9M in 2006) and held, as collateral, securities
                                           with a market value of $166.5M ($267.6M in 2006). The Company also received a cash amount of $838.6M ($493.4M in 2006) as collateral,
                                           for which an equivalent liability was recognized in other liabilities.



                                            note 5

                                           DERIVATIVE fInAncIAL InsTRUmEnTs
                                           The Company uses derivative financial instruments primarily to manage the matching of assets and liabilities, to protect itself against market,
                                           interest rate and foreign exchange rate fluctuations, and to reduce the market risk associated with the sale of certain products. It may also use such
                                           instruments to obtain a desired exposure to the underlying position for such contracts, such as a stock market exposure, and to express certain views
                                           of the market.
conso LIDATED fInA ncIAL sTATE mEnTs




                                           These derivative instruments, which are limited to contracts in the form of swaps, forwards and call or put options, are used by the Company to
                                           manage risk within the constraints imposed by the general investment policy, the general policy on derivative instruments, the matching policy,
                                           the liquidity policy, as well as the constraints imposed by the maximum amount of acceptable risk it is required to manage.

                                           The use of interest rate contracts to manage matching allows the Company to control its exposure to interest rate fluctuations while realigning its
                                           business segments and ensuring optimum long-term returns within well-defined parameters.

                                           The Company uses foreign exchange contracts to manage foreign exchange risk associated with its investments denominated in foreign currencies.

                                           Total return swaps are also used to reduce the risk of fluctuations associated with specific policyholder liabilities.


                                           cREDIT RIsK
                                           The Company assesses and monitors the credit risk of its derivative financial instruments as it does for its other financial instruments. The credit
                                           risk of a derivative financial instrument is significantly lower than its notional amount because it is limited at all times to the replacement cost and
                                           contingent credit risk.

                                           All the counterparties with which the Company carries out derivative transactions are financial institutions that have received a rating of A or better
                                           from recognized independent credit rating agencies.

                                           The Company constantly seeks opportunities to decrease uncertainty and minimize the credit risk associated with derivative transactions. Such
                                           opportunities include master netting agreements, under which the Company is permitted to offset its payables to a counterparty against its
                                           receivables when the specified terms of payment have not been honoured.

                                           The following tables show the notional amount, fair value and credit risk of the Company’s derivative instruments as at December 31, 2007 and
                                           2006. The fair value is estimated and compared with the prices obtained from counterparties. The fair value takes into account amounts received
                                           and ceded as collateral.
des ja r di ns fi na nc ial s ec ur it y
                                                                                                                                                                                  45


                                                  notionalAmount                                        FairValue
                                                                                                                                                   Credit               Risk
                                 lessthan          1to       Morethan                                                                  Risk            weighted
 2007                                   1year       5years         5years        Total        Positive                    Total      equivalent             Amount
 held for trading
 Interest rate contracts          $      66.0      $    53.4      $       25.0     $   144.4     $       1.0         $         0.3             $       0.7        $        0.1
 Credit risk contracts                     —           436.8              39.5         476.3             1.6                 (32.9)                   59.9                16.1
 Foreign exchange contracts              88.5           62.1                —          150.6            22.4                  21.9                    26.5                 5.3
 Total return swaps                     332.1           13.8               3.4         349.3              —                   (1.5)                    1.5                 0.4

 	 	 	 	 	                        	     486.6	     	   566.1	     	       67.9	    	 1,120.6	    	      25.0	        	       (12.2)	           	      88.6	       	      21.9

 Designated as fair
   value hedging
 Foreign exchange contracts             112.1              —                 —         112.1              2.2                       2.2                3.4                 0.7

 	 	 	 	 	                        $	 598.7	        $	 566.1	      $	      67.9	     1
                                                                                   $	 ,232.7	    $	     27.2	        $	 (10.0)	                $	     92.0	       $	     22.6




                                                                                                                                                                                       conso LIDATED fInA ncIAL sTATE mEnTs
                                                  notionalAmount                                        FairValue
                                                                                                                                                   Credit               Risk
                                 lessthan          1to       Morethan                                                                  Risk            weighted
 2006                                   1year       5years         5years        Total        Positive                    Total      equivalent             Amount
 Interest rate contracts          $     100.3      $    28.2      $         —      $   128.5     $      24.3         $         23.8            $      24.4        $        4.9
 Credit risk contracts                   89.9          383.7              46.6         520.2             2.1                    0.8                   58.3                14.3
 Foreign exchange contracts             202.0          122.3                —          324.3            15.6                   13.3                   23.7                 4.7
 Total return swaps                     973.5            5.8               3.7         983.0             5.7                    5.5                    8.0                 1.7

                                  $ 1,365.7        $   540.0      $       50.3     $ 1,956.0     $      47.7         $         43.4            $     114.4        $       25.6




 note 6

oThER AssETs
                                                                                                                 note                    2007	                   2006
 Premiums receivable                                                                                                                      $        194.6      $         164.6
 Amounts receivable and other                                                                                                                      147.7                102.3
 Accrued net investment income                                                                                                                      68.8                 78.0
 Investments in segregated funds (at fair value)                                                                                                    20.5                 20.6
 Future income taxes                                                                                                     14c                          —                  62.7
 Capital assets                                                                                                                                     17.1                 18.9
 Intangible assets                                                                                                                                  10.4                 10.0

     	 	 	                                                                                                 	                   	          $	       459.1      $         457.1




                                                                                                                                                                                       des ja r di ns fi na nc ial s ec ur it y
The Statement of Income includes the amortization expenses of capital assets and intangible assets in the amounts of $6.6M and $0.5M ($7.2M and
$0.4M in 2006), respectively.
                                           46



                                            note 7

                                           AcTUARIAL LIABILITIEs
                                           a) composition of Actuarial Liabilities

                                           As at December 31, actuarial liabilities and assets backing actuarial liabilities included the following amounts:

                                                                                                                                Group         Individual                               
                                             2007                                                                                Insurance        Insurance        Savings         Total
                                             Gross actuarial liabilities                                                        $    2,195.2      $    4,252.1      $   4,215.5    $ 10,662.8
                                             Amounts transferred under reinsurance treaties                                            177.5             262.1             15.4         455.0

                                             net actuarial liabilities                                                          $	 2,017.7	       $	 3,990.0	       $	 4,200.1	     10,207.8
                                                                                                                                                                                   $	

                                             composition of assets backing actuarial liabilities
                                             Bonds                                                                                   1,290.9           2,759.0          2,184.4        6,234.3
                                             Mortgage loans                                                                            497.4             438.5          1,409.7        2,345.6
                                             Real estate                                                                                  —              225.4               —           225.4
                                             Stocks                                                                                     38.3             218.9            375.0          632.2
conso LIDATED fInA ncIAL sTATE mEnTs




                                             Other                                                                                     191.1             348.2            231.0          770.3

                                                                                                                                $	 2,017.7	       $	 3,990.0	       $	 4,200.1	     10,207.8
                                                                                                                                                                                   $	




                                                                                                                                Group         Individual                               
                                             2006                                                                               Insurance        Insurance        Savings         Total
                                             Gross actuarial liabilities                                                        $    1,865.8      $    3,280.7      $   3,908.5    $   9,055.0
                                             Amounts transferred under reinsurance treaties                                            152.1             254.2             13.3          419.6

                                             net actuarial liabilities                                                          $    1,713.7      $    3,026.5      $   3,895.2    $   8,635.4

                                             composition of assets backing actuarial liabilities
                                             Bonds                                                                              $    1,300.3      $    2,162.6      $   2,314.2    $   5,777.1
                                             Mortgage loans                                                                            279.7             293.5          1,282.9        1,856.1
                                             Real estate                                                                                  —              152.2               —           152.2
                                             Stocks                                                                                     43.6             220.0              1.4          265.0
                                             Other                                                                                      90.1             198.2            296.7          585.0

                                                                                                                                $    1,713.7      $    3,026.5      $   3,895.2    $   8,635.4


                                           The fair value of assets backing actuarial liabilities is $10,337.1M ($9,492.6M in 2006).


                                           b) Actuarial Assumptions and sensitivity of Assumptions to changes
des ja r di ns fi na nc ial s ec ur it y




                                           The nature and methodology of the main assumptions used by the Company in calculating actuarial liabilities are described in the
                                           following paragraphs.

                                           The base assumptions used to determine actuarial liabilities are those that provide the best estimates of liability for various contingencies.
                                           The Appointed Actuary is required to establish a margin for adverse deviation for each assumption to offset random events, allow for a possible
                                           deterioration in experience and ensure that adequate reserves are available to meet future obligations. These margins for adverse deviation increase
                                           actuarial liabilities and reduce the gross income that otherwise would be recognized at inception of the policy. With the passage of time and
                                           the resulting reduction in estimation risk, these margins are released into income. If estimates of future conditions change throughout the life of
                                           a policy, the present value of those changes is recognized in income immediately.


                                           moRTALITy AnD moRBIDITy
                                           Each year, the Company conducts a mortality study of life insurance policies. It analyzes the results of this study and uses them to adjust the
                                           mortality assumption applied in its valuation. When the Company’s experience cannot be used as the only reference source due to low volume,
                                           the mortality assumption is also based on industry studies and tables. A 1% increase in the most probable assumption would increase actuarial
                                           liabilities by approximately $15.8M.
                                                                                                                                                        47


For annuities, the Company examines its experience, which provides a sufficient degree of credibility to establish the main basis for the assumptions.
Unlike insurance, an improvement is considered in the future mortality rates for annuities. A 1% decrease in the most probable assumption would
increase actuarial liabilities by approximately $8.4M.

With respect to morbidity, which relates to the occurrence of accidental death, dismemberment, sickness, disability and the duration of these
disabilities, the Company uses industry-developed tables which it adapts according to current claim experience studies prepared by the Company
and the industry. For products on which morbidity has a significant impact, a 1% increase in the most probable assumption would increase actuarial
liabilities by approximately $10.3M.


conTRAcT LAPsE RATEs
Policyholders can terminate their policies before the contract period expires by discontinuing premium payments. For certain insurance products with
surrender value, if the lapse rates are different from originally anticipated, an increase in the rates will have an adverse effect on the Company if
actuarial liabilities are lower than the surrender values of the policies. For other products with little or no surrender value, such as Term-to-100 life
insurance, a decrease in the lapse rates will increase the number of future death claims and decrease expected profit levels. The Company bases its
estimate of future lapse rates on previous experience for each block of business and on industry trends and studies. A negative change of 10% in
the most probable assumption concerning policy terminations would increase actuarial liabilities by approximately $76.5M.

The actuarial liabilities associated with the Company’s Term-to-100 insurance policies and Universal Life policies with level mortality costs are sensitive
to changes in the lapse rates.




                                                                                                                                                              conso LIDATED fInA ncIAL sTATE mEnTs
nET InVEsTmEnT IncomE
The Company manages its investments by taking into account the characteristics of each of its business lines’ commitments and by using
the methods clearly defined in its matching policy.

One of the controls consists of examining the duration gap between the liabilities and the assets supporting these liabilities. The duration comparison
measures the sensitivity of asset and liability values to fluctuations in interest rates. The matching control process is performed globally for all its
business lines, since the matching policy specifies certain limits in this regard.

As at December 31, 2007, the durations of assets and liabilities differed by 0.1 year (as at December 31, 2006, their durations differed by 0.1 year).
Since the valuation method already recognizes the impact of possible changes in interest rates, an immediate increase or decrease in interest rates
would have no material impact on the Company’s income.


oPERATInG ExPEnsEs
Amounts are included in the actuarial liabilities to provide for the costs of administering in-force policies, such as the cost of premium collection,
claim processing and adjudication, periodic actuarial valuations, preparation and mailing of policy statements, related indirect expenses and an
appropriate share of overhead. The process of forecasting expenses requires estimates to be made of such factors as inflation, salary rate increases,
changes in productivity, new business volumes and premium tax rates. Estimates of future policy administration costs are based on the Company’s
current unit costs adjusted for the expected rate of inflation. A 5% increase in the most probable assumption concerning the Company’s unit costs
would increase actuarial liabilities by approximately $20.2M.


PARTIcIPATInG PoLIcyhoLDER DIVIDEnDs
Actuarial liabilities include the estimated amounts of future participating policyholder dividends. The Company establishes these liabilities based on




                                                                                                                                                              des ja r di ns fi na nc ial s ec ur it y
projected future profits for that line of business and the reasonable expectations of the participating policyholders. Changes in the most probable
assumptions associated with participating insurance would result in corresponding changes in policyholder dividends and a negligible net change
in the actuarial liabilities associated with the participating policies.


c) Risk management

In addition to the risks related to actuarial assumptions, the Company is exposed to the following risks and has included the following considerations
when calculating actuarial liabilities:


mARKET RIsK
In the normal course of business, the Company is exposed to the risks of changes in the value of its assets. The Company must therefore protect
itself against such risk factors as changes in interest rates. Furthermore, under more or less favourable economic conditions, mismatched asset and
liability cash flows require reinvestments or disinvestments. To manage this risk, a matching policy clearly defining acceptable cash flow gaps has
been established for assets and liabilities. The Company examines these gaps at regular intervals to ensure they are within specified limits.
                                           48



                                            note 7 (continued)

                                           AcTUARIAL LIABILITIEs (conTInUED)
                                           c) Risk management (continued)


                                           InTEREsT RATE RIsK
                                           The following table presents the impact of an immediate and permanent 1% change in interest rates on the Company’s net income attributable to
                                           the shareholder across the entire investment yield curve, assuming the Company was unable to apply an investment strategy to mitigate the impact
                                           of this change.

                                                                                                                                                                      2007              2006
                                             1% increase in interest rates                                                                                        $       44.8      $      19.6
                                             1% decrease in interest rates                                                                                        $      (70.2)     $     (56.6)


                                           The determination of actuarial liabilities takes into account the uncertainty associated with projections regarding interest rates on the reinvestment
                                           of future cash flows in relation to the mismatching of cash flows, by scenario testing under adverse economic conditions.
conso LIDATED fInA ncIAL sTATE mEnTs




                                           InsURAncE AnD REInsURAncE RIsK
                                           In the normal course of business, the Company is exposed to insurance risk. Insurance risk is the risk that the initial pricing may be inadequate
                                           or become inadequate. It is related to medical underwriting, claim settlement and the management of contractual clauses. To manage this risk,
                                           the Company has established several policies that govern product development and pricing, as well as underwriting and liability management.
                                           The Company has also established a reinsurance policy. These policies clearly define the Company’s insurance risk management framework. The
                                           Company audits its compliance with these policies annually.

                                           The Company follows a policy of reinsuring coverage when, for instance, the policy’s sum insured exceeds certain maximum limits, which vary
                                           depending on the nature of the activities. The Company also carries catastrophe insurance. This insurance includes protection against acts
                                           of terrorism.

                                           In an effort to reduce reinsurance risk, the Company deals with several duly licensed reinsurers that must meet credit standards and are governed by
                                           the same regulatory authorities as the Company. However, such reinsurance treaties do not release the Company from its obligations to policyholders.

                                           The impact of reinsurance on premium income and benefits is as follows:

                                                                                                                                                                      2007              2006
                                             Premiums                                                                                                             $     115.6       $     113.9
                                             Benefits                                                                                                             $      76.5       $      67.2




                                           cREDIT RIsK
                                           Future investment income is affected by the magnitude of credit losses. In addition to allowances for non-performing investments applied as direct
                                           reductions to the carrying value of assets, the Company has factored an allowance of $246.1M ($185.5M in 2006) into its net investment income
des ja r di ns fi na nc ial s ec ur it y




                                           forecasts to protect itself against an inadequate return on investment.


                                           LIQUIDITy RIsK
                                           The Company takes the necessary steps to ensure it has access to sufficient funds to meet its commitments as they become due. Many commitments
                                           can become due at short notice, thereby increasing its liquidity risk.

                                           To manage this risk, the Company has adopted strict rules for matching asset and liability cash flows and established liquidity standards. The first,
                                           known as the operating liquidity standard, covers potential cash flows over a one-month horizon. The second, known as the strategic liquidity
                                           standard, is based on stress scenarios covering horizons of three months to one year. The Company’s liquid assets must be sufficient to cover
                                           potential withdrawals and surrenders.


                                           RIsK RELATED To sEGREGATED fUnDs
                                           Actuarial liabilities also include amounts that are sufficient to pay the minimum segregated fund guarantees. These amounts are calculated using
                                           stochastic models defined by the Canadian Institute of Actuaries. These models are based on the nature of the guarantees and on assumptions
                                           regarding investment returns, mortality and contract lapse rates. Deferred acquisition costs, which are the expenses incurred on the sale of individual
                                           segregated fund contracts, are recorded in actuarial liabilities and amortized over the same period as the applicable surrender charges. Actuarial
                                           liabilities recognize that future revenue is available to recover unamortized acquisition costs.
                                                                                                                                                       49


d) changes in Actuarial Liabilities

Changes in actuarial liabilities during the year were due to the following business activities and changes in actuarial estimates:

                                                                                                                             2007           2006
  Balance – beginning of year                                                                                           $	 8,635.4     $   8,185.0
  Restatement following adoption of new accounting
    policies as at January 1, 2007 (Note 3)                                                                                  1,418.1             —

  Balance as at january 1, 2007, as restated                                                                            	 10,053.5         8,185.0

  Normal change due to:
   Revised actuarial assumptions                                                                                               12.6           16.3
   Passage of time                                                                                                            149.2          439.0

                                                                                                                              161.8          455.3
  Other changes                                                                                                                (7.5)           (4.9)

  Balance – end of year                                                                                                  10,207.8
                                                                                                                        $	             $   8,635.4




                                                                                                                                                            conso LIDATED fInA ncIAL sTATE mEnTs
In 2007, the main changes to the actuarial assumptions involved expenses, mortality rates and interest rates, whereas in 2006 they involved mortality
and morbidity rates, interest rates and taxes on investment income.



 note 8

oThER LIABILITIEs
                                                                                                         note          2007	          2006
  Accounts payable, accrued liabilities and other                                                                       $      268.7   $     295.7
  Commitments under securities lending transactions                                                                            838.6         493.4
  Repurchase agreements                                                                                                        440.7         106.7
  Securities sold short                                                                                                      1,374.3         589.3
  Derivative financial instruments with a negative fair value                                                                   35.7            —
  Income and other taxes payable                                                                                                41.4          62.9
  Future income taxes                                                                                          14c              38.1            —
  Dividends payable                                                                                                             70.0          50.4

                                                                                                                        $	 3,107.5     $   1,598.4




 note 9

LonG-TERm DEBT
                                                                                                                             2007           2006




                                                                                                                                                            des ja r di ns fi na nc ial s ec ur it y
  Mortgage loans related to various real estate investments bearing interest at rates
   varying from 4.70% to 11.00%, with a weighted average of 6.03% (6.38% in 2006).                                      $	     85.8    $      83.2


The fair value of these debts, determined on a discounted contractual cash flow basis at current market interest rates for loans with similar terms
and risks, is $85.6M ($84.6M in 2006).

The interest expense for the long-term debt is $8.9M ($9.3M in 2006) and is accounted for as a reduction to investment income.

Annual principal repayments on the long-term debt over the next five years are as follows:

                                                      2008              2009             2010              2011              2012             Total
  Long-term debt                                  $       2.7      $        2.8      $       3.0      $        3.2      $        3.4   $      15.1
                                           50



                                            note 10

                                           non-conTRoLLInG InTEREsT In sUBsIDIARIEs
                                           Non-controlling interest in subsidiaries includes the non-controlling interest in the limited partnerships and the non-controlling interest held in a VIE
                                           until it was liquidated in 2006.

                                           Changes in non-controlling interest in subsidiaries during the year are as follows:

                                                                                                                                                                         2007             2006
                                             Balance – beginning of year                                                                                            $	      4.8       $        7.3
                                             Liquidation of Centaur Trust                                                                                                    —                (5.7)
                                             Non-controlling interest’s share of subsidiaries’ net income                                                                   0.9                0.7
                                             Investments                                                                                                                    0.2                2.5

                                             Balance – end of year                                                                                                  $	      5.9       $       4.8
conso LIDATED fInA ncIAL sTATE mEnTs




                                            note 11

                                           InTEREsTs In joInT VEnTUREs
                                           As at December 31, 2007, the Company held an interest in a joint venture operating primarily in real estate development and holdings. The main
                                           assets and liabilities of this joint venture, which were included in the proportional consolidation, are as follows:

                                                                                                                                                                         2007             2006
                                             Bonds                                                                                                                  $       19.7      $        —
                                             Real estate                                                                                                                      —              48.7
                                             Other assets                                                                                                                    1.4              5.5
                                             Mortgage loans                                                                                                                (18.0)           (33.7)
                                             Deferred net realized gains                                                                                                   (31.6)              —

                                                                                                                                                                    $	    (28.5)      $      20.5


                                           The operating results of the joint ventures are recognized in income using the accounting principles applied to the Company’s real estate holdings.
                                           The Company’s share of the joint ventures’ net income is $4.5M in 2007 ($7.0M in 2006). In 2007, the joint venture disposed of real estate assets
                                           and the Company’s share of realized gains is deferred and amortized quarterly in net income at the rate of 3%.



                                            note 12

                                           shARE cAPITAL AnD LIABILITIEs foR PREfERRED shAREs
                                           The authorized share capital of the Company is as follows:
des ja r di ns fi na nc ial s ec ur it y




                                           AUThoRIzED
                                           Class A shares – An unlimited number of voting shares, without par value and participating.

                                           Preferred shares – An unlimited number of Classes B, C, D, E, and F shares, without par value, non-voting, non-convertible, issuable in series,
                                           redeemable by the Company and retractable at the option of the holder at any time subject to certain restrictions, with a quarterly cumulative
                                           dividend at annual rates varying from 0.5% to 15.0% or at variable rates established based on the cost of Caisse centrale Desjardins funds.
                                           Each share is redeemable at a price equal to the paid-up capital and increased by any unpaid cumulative dividend.
                                                                                                                                                     51


IssUED AnD oUTsTAnDInG
                                                                                                                       2007             2006
 Liabilities for preferred shares
   22,000 Class C, Series 6 shares                                                                                $      22.0     $      22.0
   253,000 Class C, Series 7 shares                                                                                     253.0           253.0

 Total liabilities for preferred shares                                                                           $	   275.0      $     275.0

 share capital
  8,522,537 Class A shares (8,203,244 in 2006)                                                                    $     307.0     $     221.8

 Total share capital                                                                                              $	   307.0      $     221.8


On January 3, 2007, the Company issued 209,864 Class A shares to its parent company for a cash consideration of $56.0M.

On January 3, 2007, the Company issued 210,300 Class B Series 6 preferred shares. On January 4, 2007, the Company redeemed the 210,300 Class B
Series 6 shares for their total paid-up capital value of $210.3M.




                                                                                                                                                          conso LIDATED fInA ncIAL sTATE mEnTs
On May 29, 2007, the Company issued 109,429 Class A shares to its parent company for the sum of $29.2 M.

On the same date, the Company issued 74,805 Class B Series 6 preferred shares, which were redeemed at their paid-up capital value the same day
for an amount of $74.8M (Note 19).

Dividend payments of $9.5M ($9.5M in 2006) on preferred shares are carried as an interest expense and recorded in operating expenses.



 note 13

AccUmULATED oThER comPREhEnsIVE IncomE
As at December 31, 2007, accumulated other comprehensive income totalling $66.7M, of which $10.6M are attributable to policyholders, includes
only unrealized gains and losses on assets available for sale.

Other comprehensive income for the period ended December 31, 2007, and its allocation to policyholders’ equity and shareholder’s equity are
as follows:

                                                                                            Participating                                 
 2007                                                                                          policyholders    Shareholder           Total
 Change in unrealized gains (losses) on assets available
  for sale during the year                                                                       $                $               $
  Bonds (net of taxes of 4.5)                                                                            (0.6)           (3.0)            (3.6)
  Stocks (net of taxes of 3.8)                                                                            0.5             0.1              0.6
  Money market securities (net of taxes of 0.1)                                                            —              0.1              0.1

                                                                                                         (0.1)           (2.8)            (2.9)




                                                                                                                                                          des ja r di ns fi na nc ial s ec ur it y
 Reclassification in net income of (gains) and losses
   realized during the year
   Bonds (net of taxes of 7.1)                                                                           (2.7)          (12.7)           (15.4)
   Stocks (net of taxes of 0.5)                                                                          (0.5)           (3.9)            (4.4)

                                                                                                         (3.2)          (16.6)           (19.8)

 other comprehensive income                                                                      $	      (3.3)	   $	    (19.4)	   $	    (22.7)
                                           52



                                            note 14

                                           IncomE TAxEs
                                           a) Income Tax Expense

                                           Income tax expense includes the following amounts:

                                                                                                                                                                    2007               2006
                                            Current income taxes                                                                                               $      51.5         $    51.9
                                            Future income taxes                                                                                                       19.2              (1.1)

                                            	 	 	 	 	                                                                                         	           	    $	     70.7         $    50.8



                                           b) Income Taxes

                                           Income is subject to Canadian income taxes. The effective income tax rate varies from year to year based on changes in the combined statutory tax
                                           rate. The provision for income taxes in the Statement of Income differs from the provision obtained by applying the combined statutory tax rate for
                                           the following reasons:
conso LIDATED fInA ncIAL sTATE mEnTs




                                                                                                                                                                    2007               2006
                                            Income taxes on operating income at the combined statutory rate of 32.93% in 2007
                                              (32.90% in 2006)                                                                                                 $      94.9         $    66.7
                                            Change due to the following items:
                                              Net investment income and other non-taxable or non-deductible items (net)                                                (9.9)              (2.0)
                                              Impact of new rates enacted on future income taxes                                                                       (6.3)               0.8
                                              Revaluation of future income taxes and other                                                                             (8.0)              (1.7)
                                              Recognition of future income tax assets related to capital losses carried forward                                          —              (13.0)

                                                                                                                                                               $	     70.7         $    50.8



                                           c) future Income Tax Assets (Liabilities)

                                           Future income tax assets (liabilities), which are based on estimates of temporary differences performed as at December 31, arise from
                                           the following items:

                                                                                                                                                                    2007               2006
                                            Investments                                                                                                        $    (577.6)        $    (45.8)
                                            Policy liabilities                                                                                                       528.4               84.7
                                            Capital losses carried forward                                                                                             2.4               17.3
                                            Other                                                                                                                      8.7                6.5

                                            future income tax assets (liabilities)                                                                             $	    (38.1)        $    62.7
des ja r di ns fi na nc ial s ec ur it y




                                            note 15

                                           DIsTRIBUTIon of IncomE To ThE shAREhoLDER
                                           AnD PARTIcIPATInG PoLIcyhoLDERs
                                           Under the Act Respecting Insurance (Québec), payment of dividends           Furthermore, to meet various financial management requirements,
                                           to the shareholder and policyholders is subject to the Company’s            the appropriated policyholders’ equity is $43.0M ($38.2M in 2006)
                                           compliance with the minimum capital adequacy standards prescribed           and the appropriated retained earnings are $201.6M ($187.5M
                                           by the Autorité des marchés financiers.                                     in 2006).
                                                                                                                                                         53



 note 16

commITmEnTs, GUARAnTEEs AnD conTInGEncIEs
a) contingent Liabilities                                                     to the notional amount of the swap. The amounts that may have to
                                                                              be disbursed depend on the nature of the default and the recovery
The Company may have lawsuits brought against it in the normal                rate for the securities in collection. The underlying assets for these
course of business. While it is not possible to estimate the outcome          swaps are composed of corporate securities or tranches of high-quality
of the various proceedings at this time, such lawsuits have in the past       securitization structures. At December 31, 2007, all the underlying
been resolved without any expenses in excess of amounts provided              securities were rated BBB or higher by the rating agencies.
for in actuarial liabilities, and the Company does not believe that it
will incur any significant additional loss or expense in connection with      These swaps mature on various dates until 2014. As at December 31,
these proceedings.                                                            2007, the maximum amount that could be disbursed under this
                                                                              guarantee totalled $476.3M.
b) Litigation

In the past few years, insurance companies in the U.S. and Canada have        InDEmnIfIcATIon AGREEmEnTs
been taken to court with respect to participating life insurance policies
                                                                              In the normal course of business, the Company enters into agreements
with vanishing premiums. In some cases, these proceedings resulted in
                                                                              containing indemnification provisions. The indemnifications are normally
significant company payouts. A motion for authorization to institute a




                                                                                                                                                                conso LIDATED fInA ncIAL sTATE mEnTs
                                                                              related to purchasing contracts, service agreements, outsourcing
class action has been filed against the Company in Canada. The case
                                                                              agreements, lease agreements, netting agreements and asset or stock
is still in its preliminary phase. However, based on a 2004 Supreme
                                                                              transfer agreements. Under the terms of these contracts, the Company
Court of Canada ruling in a very similar case, it appears unlikely that
                                                                              may be liable for indemnifying a counterparty if certain events occur,
authorization would be granted and that the outcome would be
                                                                              such as amendments to statutes and regulations, changes in reported
unfavourable to the Company. No specific provision has been recorded
                                                                              financial positions and the existence of unreported liabilities, losses
in this regard in the financial statements as at December 31, 2007.
                                                                              resulting from third-party activities or as a result of third-party litigation.
                                                                              The indemnification provisions vary depending on the contract. In many
c) contracts                                                                  cases, the contracts do not specify any predetermined amounts or limits,
                                                                              and the events that could give rise to a claim are difficult to foresee.
Payments under the Company’s contractual obligations, mainly in               Consequently, the Company is not in a position to provide a reasonable
respect of leases and various services over the coming fiscal years, total    estimate of the maximum amount it could be required to pay to
$36.8M and break down as follows: $10.1M in 2008, $4.0M in 2009,              counterparties. Historically, payments made under these indemnification
$2.1M in 2010, $1.5M in 2011, $1.3M in 2012 and $17.8M thereafter.            agreements have been negligible, and the probability of conditions
                                                                              occurring that would engage the Company’s liability under these
                                                                              contracts is low and difficult to evaluate. No specific liability has been
d) contractual commitments                                                    recorded with respect to these agreements.
The Company’s major commitments in effect on December 31, 2007,
are as follows:
                                                                              InDEmnIfIcATIon of DIREcToRs AnD offIcERs
                                                                              The Company will indemnify its directors and officers as well as any
DERIVATIVEs                                                                   person who, at its request, acted in that capacity for another entity
                                                                              in the event a claim or lawsuit is filed against them. The Company
In the normal course of its investment activities, the Company has
                                                                              maintains liability insurance policies for its directors and officers. Based
entered into credit default swaps on investment securities and has
                                                                              on the nature of these indemnities, it is difficult to give a reasonable
undertaken to assume the credit risk for the investment securities
                                                                              estimate of the amount the Company could be required to pay.
concerned. The guarantee consists in providing partial or full payment
                                                                              No specific liability has been recorded with respect to these indemnities.
for a security or group of securities in the event that the issuer defaults
on payment. The maximum amount of this guarantee corresponds




                                                                                                                                                                des ja r di ns fi na nc ial s ec ur it y
                                           54



                                            note 17

                                           EmPLoyEE fUTURE BEnEfITs AnD PEnsIon PLAns
                                           a) Employee future Benefits costs                                           The Company also offers additional defined benefit pension plans,
                                                                                                                       including the Desjardins Group Unified Excess Pension Plan to some
                                           The Company’s employees belong to the Desjardins Group Pension              of its active and retired executives. To meet its future obligations under
                                           Plan, a multiemployer defined benefit pension plan. The last actuarial      these plans, an amount of $14.8M ($12.2M in 2006) was recorded
                                           valuation, which was performed on December 31, 2006, showed                 under other liabilities. The expense for the year totals $1.2M ($1.9M
                                           that the Plan as a whole had a surplus of $167.5M on a funding              in 2006).
                                           basis and a deficit of $63.4M on a solvency basis. To eliminate this
                                           deficit as at December 31, 2006, the employers are required to make
                                           special payments totalling $1.2M per month from January 1, 2007 to          b) management of the Desjardins Group Pension Plan
                                           December 31, 2011 or until a subsequent actuarial valuation shows
                                           that the Plan no longer has a deficit with respect to solvency. Expenses    The Company’s management of the Plan’s assets through a group
                                           related to the Plan, including the Company’s share of the special           annuity contract was terminated on December 30, 2006. The resulting
                                           payments, amount to $18.8M in 2007 ($16.9M in 2006). The Plan               transfer of assets, which had been included in the Company’s
                                           assets and benefit obligation were measured as at September 30, 2007.       segregated funds, totalled $3,972.6M on that date. However,
                                           The next actuarial valuation required for funding purposes must be          the Company retains its role with respect to the administration of
                                           performed no later than December 31, 2009.                                  the plan and continues to offer various plan management services.
conso LIDATED fInA ncIAL sTATE mEnTs




                                            note 18

                                           GoVERnmEnT AssIsTAncE
                                           Upon receipt of its Annual Eligibility Certificate, the Company will        in the amount of $16.8M ($13.9M in 2006), $11.2M after taxes
                                           benefit from a government assistance program for major investment           ($9.3M in 2006), as a reduction to operating expenses.
                                           projects. During the year, the Company recorded government assistance



                                            note 19

                                           RELATED PARTy TRAnsAcTIons
                                           In the normal course of business, the Company carries out transactions with entities of Desjardins Group. These transactions are measured at their
                                           exchange value, which is equal to the consideration established and agreed to by the related parties.

                                           The table below summarizes these transactions:

                                                                                                                                                                     2007              2006
                                            Revenue
                                             Premium income                                                                                                     $      132.5      $     121.6
                                             Net investment income                                                                                                      54.1              5.0

                                                                                                                                                                $	    186.6       $     126.6
des ja r di ns fi na nc ial s ec ur it y




                                            operating expenses                                                                                                  $	    104.6       $     102.6


                                           The above revenue stems from the sale of life and health insurance products and investments, while the expenses consist primarily of
                                           management fees, securities custody fees and compensation and administrative expenses paid to the Desjardins caisse network for distributing
                                           the Company’s products.

                                           Furthermore, on December 20, 2006, in the normal course of business, the Company acquired a block of mortgage loans from Desjardins Trust.
                                           This transaction was concluded and recorded at its exchange amount of $40.2M, which represents its fair value.
                                                                                                                                                        55


The account balances with related parties included in the Balance Sheet as at December 31 are as follows:

                                                                                                                             2007             2006
  Assets
   Bonds                                                                                                                $       0.1      $       35.8
   Stocks                                                                                                                       3.7              20.9
   Cash and money market instruments                                                                                          338.7              97.5
   Other assets                                                                                                                17.3              12.3

                                                                                                                        $	   359.8       $     166.5

  Liabilities
    Other liabilities                                                                                                   $     111.3      $     146.5
    Liabilities for preferred shares                                                                                          275.0            275.0

                                                                                                                        $	   386.3       $     421.5




RELATED PARTy TRAnsAcTIons noT In ThE noRmAL coURsE of oPERATIons




                                                                                                                                                             conso LIDATED fInA ncIAL sTATE mEnTs
In addition to the transactions conducted in the normal course of operations, the Company also carried out the following transactions with
Desjardins Group entities.

On January 3, 2007, the Company repaid an advance of $85.0M obtained from its parent company on December 29, 2006. On the same date,
the Company issued 209,864 Class A shares to its parent company for a cash consideration of $56.0M.

On January 3, 2007, the Company also acquired 90.09% of the shares in Place Desjardins inc. (PDI) from the Fédération des caisses Desjardins du
Québec (FCDQ) for an amount of $210.3M. The Company financed the transaction by issuing 210,300 Class B Series 6 shares. The acquisition,
which was carried out at fair value, was recorded at carrying value in the books of the FCDQ, that is, at $98.7M, and generated a $111.7M debit
against shareholder’s equity ($5.7M against contributed surplus and $106.0M against retained earnings). Furthermore, the revaluation of PDI future
taxes based on the tax rates in effect at Desjardins Financial Security created an increase in future tax liabilities of $3.3M, which was also immediately
charged to retained earnings. With this transaction, the Company became the sole shareholder of PDI.

On January 4, 2007, the Company redeemed the 210,300 Class B Series 6 shares at their total paid-up capital value of $210. 3M.

On May 29, 2007, the parent company invested $29.2M in the Company, and 109,429 Class A shares were issued as consideration.

On the same date, the Company acquired five properties from the FCDQ and two properties from Desjardins General Insurance Group Inc. (DGIG)
located in Lévis for a total amount of $74.8M. These transactions, which were financed through an issue of 74,805 Class B Series 6 preferred shares,
were carried out at fair value and recognized at carrying value in the books of the FCDQ and DGIG. They generated a debit of $26.1M against
shareholder’s equity ($14.1M against distributed surplus and $12.0M against retained earnings).

On May 29, the Company redeemed the FCDQ and DGIG Class B preferred shares for their total paid-up capital value of $74.8M.



 note 20

sEGmEnTED InfoRmATIon

                                                                                                                                                             des ja r di ns fi na nc ial s ec ur it y
The Company conducts business in various operating segments, which are based on the type of products distributed or the distribution method.

The Company’s group insurance segment is divided into two areas of activity. The first includes group life and health insurance plans for groups,
businesses and associations, which are distributed across Canada by agents, group plan brokers and consulting actuaries. The second includes
the group death and disability plans for loans or deposit-linked life insurance distributed in financial institutions, particularly to Desjardins
Group members.

The Company’s individual insurance products are distributed by brokers, managing general agents (MGAs), financial security advisors assigned
to the caisses Desjardins, direct marketing and the Internet.

The Company’s savings products are distributed in the same manner as individual and group insurance products and include segregated-
fund transactions.

The significant accounting policies used by the Company’s various business segments are the same as those described in Note 2.
                                           56



                                            note 20 (continued)

                                           sEGmEnTED InfoRmATIon (conTInUED)
                                           In addition to the segmented information related to the actuarial liabilities and their main supporting assets mentioned in Note 7, the table below
                                           summarizes the results by segment.

                                                                                                               Group         Individual
                                            2007                                                                Insurance         Insurance        Savings        other            Total
                                            Premium income
                                              Products distributed to Desjardins Group members               $       507.5     $       115.0      $       6.7     $       —      $      629.2
                                              Other distribution networks                                          1,429.6             277.6            238.9             —           1,946.1
                                            Net investment income                                                    117.1             179.9            217.5           (0.2)           514.3
                                            Other revenue                                                             13.6              19.7             96.1            3.7            133.1

                                            Total revenue                                                         2,067.8	     	       592.2	     	    559.2	     	     3.5	     	    3,222.7

                                            Expenses attributable to policyholders                                 1,466.8             338.5            410.4             —           2,215.7
                                            Other expenses                                                           387.5             191.9            137.3            2.0            718.7
conso LIDATED fInA ncIAL sTATE mEnTs




                                            Total expenses                                                        1,854.3	     	       530.4	     	    547.7	     	     2.0	     	    2,934.4

                                            operating income                                                        213.5	     	        61.8	     	      11.5	    	     1.5	     	     288.3
                                            Income taxes                                                             53.2               14.7              2.2           0.6             70.7
                                            Non-controlling interest in subsidiaries                                   —                  —                —            0.9              0.9

                                            net income                                                       $	     160.3	     $	       47.1	     $	      9.3	    $	      —	     $	    216.7




                                                                                                               Group         Individual
                                            2006                                                               Insurance         Insurance        Savings        other            Total
                                            Premium income
                                              Products distributed to Desjardins Group members               $       481.6     $       100.9      $       7.2     $       —      $      589.7
                                              Other distribution networks                                          1,209.9             273.3            365.5             —           1,848.7
                                            Net investment income                                                    146.7             265.5            262.5           (0.6)           674.1
                                            Other revenue                                                             13.1              20.9             77.9            3.3            115.2

                                            Total revenue                                                          1,851.3             660.6            713.1            2.7          3,227.7

                                            Expenses attributable to policyholders                                 1,354.9             422.0            584.5             —           2,361.4
                                            Other expenses                                                           358.5             184.4            119.2            1.4            663.5

                                            Total expenses                                                         1,713.4             606.4            703.7            1.4          3,024.9

                                            operating income                                                         137.9               54.2             9.4            1.3            202.8
des ja r di ns fi na nc ial s ec ur it y




                                            Income taxes                                                              36.8               12.2             1.2            0.6             50.8
                                            Non-controlling interest in subsidiaries                                    —                  —               —             0.7              0.7

                                            net income                                                       $       101.1     $         42.0     $       8.2     $       —      $      151.3




                                            note 21

                                           comPARATIVE fIGUREs
                                           Certain figures for 2006, presented for comparative purposes, have been reclassified to conform to the presentation adopted in 2007. However,
                                           the comparative data were not restated following the accounting changes described in Note 3.
                                                                                                                       57




fIVE-yEAR sUmmARy



for the years ended december 31
(in millions of dollars, unless otherwise indicated)

                                                         2007         2006         2005         2004         2003

  PRofITABILITy AnD cAPITALIzATIon
  Net income                                              216.7        151.3        159.7        130.2        109.7
    Continuing operations                                 216.7        151.3        154.4        128.8        106.0
    Discontinued operations                                 0.0          0.0          5.3          1.4          3.7
  Operating income                                        288.3        202.8        184.9        186.9        127.5
  Net income attributable to shareholder                  211.1        145.8        151.6        127.5        100.2
  Return on shareholder’s equity                           27.5%        20.7%        24.9%        19.6%        14.1%


  BUsInEss GRowTh




                                                                                                                            fIVE -yEAR sU mmARy
  Insurance in force                                   171,009.4    151,191.9    137,117.7    131,896.5    126,386.2
  Net premiums
    Insurance premiums                                   2,329.7      2,065.7      1,905.3      1,784.4      1,661.8
    Annuity premiums                                       245.6        372.7        395.0        305.8        351.3

  Total                                                 2,575.3       2,438.4      2,300.3      2,090.2      2,013.1


  sAVInGs
  Group products                                          218.5        290.6        316.1        171.3        166.2
  Individual products                                     255.8        254.9        236.6        236.5        236.2
  Mutual funds                                            636.3        516.9        461.7        344.5        220.2

  Total                                                 1,110.6       1,062.4      1,014.4       752.3        622.6


  AssETs UnDER mAnAGEmEnT
  AnD ADmInIsTRATIon




                                                                                                                            des ja r di ns fi na nc ial s ec ur it y
  General fund                                          15,307.9     12,804.0     11,921.3     10,250.6      9,665.7
  Segregated funds                                       2,246.9      2,112.1      5,292.3      4,677.1      4,383.9
  Mutual funds                                           5,021.4      5,028.4      3,170.2      2,670.0      2,315.0

  Total                                                22,576.2      19,944.5     20,383.8     17,597.7     16,364.6


  InVEsTmEnT QUALITy
  Bonds
  Rated A or higher                                         95.2%        95.0%        96.4%        97.0%        96.7%
  stocks
  Market value as a percentage of carrying value          100.0%       110.1%       105.4%       105.1%       113.8%
  Real Estate
  Market value as a percentage of carrying value          127.1%       116.8%       116.2%       111.7%       105.1%


  oThER InfoRmATIon
  Number of employees                                     3,893        3,734        3,659        3,628        3,679
  Representatives and brokers                             5,542        5,321        5,873        5,749        5,831
                                           58




                                           coRPoRATE InfoRmATIon



                                           BOARD OF DIRECTORS
                                           As at December 31, 2007


                                           chair of the Board                     members of the Board

                                           sylvie	st-PieRRe	BaBin                 seRge	cloutieR                          seRge	hamelin                          suzanne		
                                           Gatineau, Quebec                       Repentigny, Quebec                      Laval, Quebec                          maisonneuve-Benoît
                                           Vice-President of the                  General Manager                         Consulting Actuary                     Mont-Tremblant, Quebec
coRPoRATE InfoRmATI on




                                           Abitibi-Témiscamingue Nord et Ouest    Caisse Desjardins Allard – Saint-Paul   Daigneault & Hamelin, Actuaires        Administrative Consultant
                                           du Québec Council of Representatives
                                                                                  PieRRe	gingRas                          monique	leFeBvRe                       Jocelyn	nadeau
                                                                                  Sainte-Pétronille, Quebec               Montréal, Quebec                       Sainte-Mélanie, Quebec
                                           senior Deputy chair
                                                                                  Chartered Administrator (C. Adm.)       Psychologist, Executive Coaching       General Manager
                                                                                  President of Placements Moras Inc.      Consultant, Strategic Management and   Caisse populaire Desjardins de la Ouareau
                                           Jacques	sylvestRe                                                              Business Governance
                                           Saint-Hyacinthe, Quebec                RoBeRt	gueRRieRo                                                               michel	Rouleau
                                           Legal Counsel                          Laval, Quebec                           denis	levesque                         Sainte-Marie-de-Beauce, Quebec
                                           Sylvestre & Associés, avocats          Chartered Accountant                    Rockland, Ontario                      Corporate Director
                                                                                  Corporate and Cooperative Director      Adjunct Professor
                                                                                  Chair of the Board of Directors         University of Ottawa                   Réal	suReau
                                                                                  Caisse populaire canadienne italienne                                          Verdun, Quebec
                                                                                                                                                                 Chartered Accountant
                                                                                                                                                                 President of Sureau Management Limited




                                           BoARD commITTEEs
des ja r di ns fi na nc ial s ec ur it y




                                           Executive committee                    Investment committee                    Audit committee                        Ethics committee

                                           sylvie	st-PieRRe	BaBin                 michel	Rouleau                          seRge	hamelin                          suzanne	maisonneuve-
                                           Chair                                  Chair                                   Chair                                  Benoît
                                                                                                                                                                 Chair
                                           monique	leFeBvRe                       sylvie	st-PieRRe	BaBin                  seRge	cloutieR
                                                                                                                                                                 denis	levesque
                                           Jocelyn	nadeau                         PieRRe	gingRas                          Réal	suReau

                                           Jacques	sylvestRe                      RoBeRt	gueRRieRo

                                                                                  RichaRd	FoRtieR
                                                                                  Ex-Officio Member

                                                                                  seRge	cloutieR
                                                                                  Observer

                                                                                  louis-daniel	gauvin
                                                                                  Observer

                                                                                  FRançois	dRouin
                                                                                  Observer
                                                                                                                                                                               59




COMPANy MANAGEMENT

alBan	d’amouRs
President and Chief Executive Officer, Desjardins Group
Chief Executive Officer, Desjardins Financial Security


RichaRd	FoRtieR                       camil	lévesque                        clément	clément*
President and Chief                   Vice-President                        Vice-President
Operating Officer                     Corporate Actuarial Services          Internal Audit and Compliance
                                                                            *Reports to the Audit Committee



alain	BédaRd                          Jean	caRon                            gilles	duBé                       stéPhane	dulude                 andRé	langlois
Senior Vice-President                 Vice-President                        Vice-President                    Vice-President and              Vice-President
Individual Insurance                  Sales, AssurFinance for Individuals   Customer Service, Individual      General Manager                 Product Development and
                                                                            Insurance and Savings             Desjardins Financial Security   Marketing, Individual Insurance
                                                                                                              Investments Inc.


monique	tRemBlay                      michel	desmaRais                      annick	douville                   PeteR	FeRland
Senior Vice-President                 Vice-President                        Vice-President                    Vice-President
Savings and Segregated Funds          Product Development and               Customer Service, Savings for     Sales, Savings and
                                      Marketing, Savings and                Groups and Businesses and         Segregated Funds
                                      Segregated Funds                      Segregated Funds




                                                                                                                                                                                    coRPoRATE InfoRmATI on
louise	tuRgeon                        stéPhane	Beaulé                       FRançois	duRocheR                 linda	Fiset                     hélène	gagnon
Senior Vice-President                 Vice-President                        Vice-President                    Vice-President                  Vice-President
AssurFinance for Institutions,        Sales, AssurFinance for               Sales and Business Development,   Strategy Development and        Customer Service
AssurDirect and Desjardins            Institutions (Quebec) and             Credit Insurance (Ontario,        Marketing, AssurFinance         AssurFinance for Institutions,
Relations                             Desjardins Relations                  Atlantic and Western Regions)     for Institutions, AssurDirect   AssurDirect and Other
President of Sigma Assistel                                                 and AssurDirect                   and Desjardins Relations        Business Lines
                                      louise	des	oRmeaux
                                      General Manager                       andRé	l.	duval
                                      Sigma Assistel                        Vice-President
                                                                            Actuarial and Financial
                                                                            Management, AssurFinance for
                                                                            Institutions and AssurDirect


alain	thauvette                       maRc	caRRieR                          Jean-Jacques	                     andRé	simaRd                    lucien	Roy
Senior Vice-President                 Vice-President                        PaRadis                           Vice-President                  Vice-President
Group and Business Insurance          Underwriting, Group                   Vice-President                    Sales, Group and Business       Customer Service, Group and
                                      and Business Insurance                Product Development and           Insurance                       Business Insurance
                                                                            Marketing, Group and
                                                                            Business Insurance




                                                                                                                                                                                    des ja r di ns fi na nc ial s ec ur it y
FRançois	dRouin                       andRé	giRaRd                          diane	gosselin                    diane	RoBeRt
Senior Vice-President                 Vice-President                        Vice-President                    Vice-President
Finance                               Financial Reporting and               Integrated Risk Management        Finance
                                      Material Resources                    and Reinsurance
                                      Controller


RichaRd	FoRtieR*		                    Josette	BéRuBé                        FRançois	cholette                 claude	R.	gaBouRy               colette	n.	PieRRot
(inteRim)                             Vice-President                        Vice-President                    Vice-President                  Vice-President
Senior Vice-President, Corporate      Architecture and                      Legal Affairs                     Systems Operations              Marketing and Strategic Planning
Services and Technology               Infrastructure Projects               Corporate Secretary               and Outsourcing
* position held by                                                                                            Contract Management             daniel	Roussel
  Constance Lemieux until             lise	BoRdeleau                        RichaRd	cloutieR                                                  Vice-President
  December 2007                       Vice-President                        Vice-President                    micheline	geRvais               Public Affairs and
                                      Human Resources and                   Systems Development               Vice-President                  Communications
                                      Organizational Development                                              Process Management Support      Dispute Resolution Officer


géRaRd	guilBault
Chief Investment Officer
                                           60




                                           OFFICE CONTACT INFORMATION
                                           ADDREssEs
                                           mAIn offIcEs
                                           Desjardins financial security

                                           head	oFFice                                     montRéal                                          quéBec                              toRonto
                                           200, rue des Commandeurs                        1, complexe Desjardins                            1150, rue de Claire-Fontaine        95 St. Clair Avenue West
                                           Lévis (Québec) G6V 6R2                          Tour Sud, 21e étage                               Québec (Québec) G1R 5G4             Toronto, Ontario M4V 1N7
                                                                                           Montréal (Québec) H5B 1E2
                                           418 838-7800                                                                                      418 647-5000                        416-926-2700
                                           1 877 828-7800                                  514 350-8700                                      1 888 893-1833                      1-877-906-5551
                                                                                           1 877 750-8700




                                           REGIonAL offIcEs
                                           Atlantic canada                                 Quebec                                            western canada

                                           haliFax/daRthmouth                              lévis	                                            winniPeg                            vancouveR	
                                           99 Wyse Road, Suite 1400                        Complexe Maurice-Tanguay                          363 Broadway, Suite 1490            401 West Georgia Street, Suite 1050
                                           Dartmouth, Nova Scotia B3A 4S5                  5790, boul. Étienne-Dallaire, bureau 203          Winnipeg, Manitoba R3C 3N9          Vancouver, British Columbia V6B 5A1
                                                                                           Lévis (Québec) G6V 8V6
                                           902-466-8881                                                                                      204-989-4350                        604-718-4410
coRPoRATE InfoRmATI on




                                                                                           418 838-7800
                                            	                                                                                                 	
                                           st.	John’s                                                                                        calgaRy
                                           Village Shopping Centre                         ontario                                           Bow Valley Square 1
                                           430 Topsail                                                                                       202 – 6th Avenue S. W., Suite 560
                                           St. John’s, Newfoundland and Labrador           ottawa	                                           Calgary, Alberta T2P 2R9
                                           A1E 4N1                                         14 Chamberlain Avenue, Suite 201
                                                                                           Ottawa, Ontario K1S 1V9                           403-216-5800
                                           709-747-8473
                                                                                           613-224-3121




                                           sUBsIDIARIEs

                                           desJaRdins	Financial	                           sigma	assistel	inc.
                                           secuRity	investments	inc.                       1100, boul. René-Lévesque Ouest,
                                           1150, rue de Claire-Fontaine                    15e étage
                                           Québec (Québec) G1R 5G4                         Montréal (Québec) H3B 4N4

                                           418 647-5000                                    514-875-6390
                                           1 888 893-1833                                  1-800-465-8700
des ja r di ns fi na nc ial s ec ur it y




                                           For the addresses of our financial centres, call 1-866-839-9904,
                                           or visit www.dfsin.ca




                                           InTERnET ADDREssEs
                                           desJaRdins	Financial	secuRity:	                             www.desjardinsfinancialsecurity.com
                                           sFl:	                                                       www.sfl.qc.ca
                                           desJaRdins	Financial	secuRity		
                                           indePendent	netwoRk:	                                       www.dfsin.ca
                                           sigma	assistel:	                                            www.assistel.com
                                           desJaRdins	gRouP:	                                          www.desjardins.com
published by public Affairs and Communications
March 2008

For more information, visit our website or contact our Communications
                                                                        vERSION FRANÇAISE
Department.                                                             Le présent rapport financier et d’autres publications
                                                                        peuvent être consultés sur le site internet de la
This Financial report and other publications may be viewed on the       Compagnie ou commandés par écrit, télécopie
Company’s website. Copies may also be ordered in writing or by phone,   ou courriel.
email or fax.
                                                                        Direction principale Communications
Communications Department                                               Desjardins Sécurité financière
Desjardins Financial Security                                           200, rue des Commandeurs
200, rue des Commandeurs                                                Lévis (Québec)
Lévis (Québec)                                                          G6V 6r2
G6V 6r2
                                                                        Téléphone :       1 877 828-7800, poste 7447
phone:        1-877-828-7800, extension 7447                            Télécopieur :     418 833-5985
Fax:          418-833-5985                                              Courriel :        info@desjardinssecuritefinanciere.com
Email:        info@desjardinsfinancialsecurity.com                      Site internet :   www.desjardinssecuritefinanciere.com/
Website:      www.desjardinsfinancialsecurity.com/ourcompany                              lacompagnie
               As the life and health insurance arm of Desjardins
               Group, Canada’s largest integrated financial
| VAnCouVEr    cooperative, Desjardins Financial Security Life
               Assurance Company helps more than five million
               Canadians prepare for life’s contingencies and plan
| CALGAry
               a financially secure retirement, by offering them a
               tailor-made combination of life and health insurance
| WinnipEG     coverages and innovative savings solutions. With its
               comprehensive and sensitive approach to meeting
               clients’ needs, Desjardins Financial Security provides
| ToronTo      an important safety net for illness and life’s other
               unexpected events, and helps Canadians make their
               retirement dreams come true.
| oTTAWA


| MonTréAL


| QuébEC


| LéViS


| HALiFAx


| ST. JoHn’S
                                                                               07344E (08-03)




               desjardinsfinancialsecurity.com
               1-800-463-7870

               ® Registered trademark owned by Desjardins Financial Security

				
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